EX-99.3 4 d477394dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

 

LOGO

NOTICES OF SPECIAL MEETINGS AND

JOINT MANAGEMENT INFORMATION CIRCULAR OF

HUDBAY MINERALS INC. and COPPER MOUNTAIN MINING CORPORATION

for the

SPECIAL MEETINGS OF SHAREHOLDERS

TO BE HELD ON JUNE 13, 2023

with respect to a proposed

PLAN OF ARRANGEMENT

involving

HUDBAY MINERALS INC. and COPPER MOUNTAIN MINING CORPORATION

MAY 15, 2023

 

TAKE ACTION AND VOTE TODAY

These materials are important and require your immediate attention. The shareholders of Hudbay Minerals Inc. (“Hudbay”) and Copper Mountain Mining Corporation (“CMMC”) are required to make important decisions. If you are in doubt as to how to make such decisions, please contact your financial, legal, tax or other professional advisors.

Hudbay Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-866-581-1571 (toll-free in North America) or 1-416-623-2514 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.HudbayPOA.com.

CMMC Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

No securities regulatory authority or stock exchange in Canada, the United States, Australia or elsewhere has expressed an opinion about, or passed upon the fairness or merits of, the transactions described in this document, the securities being offered pursuant to such transactions or the adequacy of the information contained in this document and it is an offense to claim otherwise. No securities regulatory authority or stock exchange in Canada, the United States, Australia or elsewhere has approved or registered this document, and this document is not required to be registered with a securities regulatory authority or stock exchange in any such jurisdiction. This document is not a prospectus under the Australian Corporations Act.


LETTER TO HUDBAY SHAREHOLDERS

May 15, 2023

Dear Hudbay Shareholders,

The board of directors of Hudbay Minerals Inc. (“Hudbay”) cordially invites you to attend the special meeting of the holders of common shares of Hudbay to be held in a virtual-only format on June 13, 2023 at 10:30 a.m. (Toronto time) (the “Hudbay Meeting”). At the Hudbay Meeting, you will be asked to consider a resolution regarding the issuance of Hudbay common shares in connection with the proposed acquisition by Hudbay of all the outstanding common shares of Copper Mountain Mining Corporation (“CMMC”) pursuant to a plan of arrangement (the “Transaction”).

The Transaction will create a premier Americas-focused copper mining company that is well-positioned to deliver sustainable cash flows. All assets in the combined portfolio are located in tier-one mining-friendly jurisdictions of Canada, Peru and the United States and the combined company is expected to represent the third largest copper producer in Canada based on 2023 estimated copper production.

After consummating the Transaction, the combined company will have a larger-scale platform backed by three long-life operating mines with exploration and expansion upside, three large-scale development projects and one of the largest mineral resource bases among intermediate copper producers. Further, we believe that the combination of Hudbay and CMMC creates an opportunity for us to apply Hudbay’s strong operating practices to the CMMC mine in British Columbia, which is expected to result in meaningful synergies and efficiencies.

Additionally, Hudbay and CMMC have each demonstrated a devoted shared commitment to the highest safety and ESG standards and we strongly believe the combined company is well-positioned to continue this commitment into the future under the supervision of a talented, experienced and driven senior executive management team. From a leadership perspective, we are also very excited to welcome two new members to our board of directors from CMMC following closing of the Transaction. We are confident that the two new members will bring significant additional industry knowledge and complementary expertise to the combined company. Further details of the Transaction, including regarding the proposed issuance of Hudbay common shares in connection with the Transaction, are described in more detail in the accompanying Notice of Special Meeting of Shareholders of Hudbay and the Joint Management Information Circular.

On behalf of the rest of the Hudbay board of directors and the Hudbay management team, I would like to express our gratitude for the support our Hudbay shareholders have demonstrated with respect to our decision to undertake this Transaction. We believe that this opportunity will be transformative for both Hudbay and CMMC shareholders and is an exciting next step in our journey as we continue to remain focused on disciplined capital allocation to achieve our strategic objectives.

We encourage you to vote at the Hudbay Meeting and we thank you for your continued support.

 

Yours very truly,

(Signed) “Stephen A. Lang

Stephen A. Lang

Chair, Board of Directors

Hudbay Minerals Inc.


LETTER TO COPPER MOUNTAIN SHAREHOLDERS

May 15, 2023

Dear CMMC Shareholders,

The board of directors (the “CMMC Board”) of Copper Mountain Mining Corporation (“CMMC”) cordially invites you to attend a special meeting (the “CMMC Meeting”) of the holders (the “CMMC Shareholders”) of common shares in the capital of CMMC (the “CMMC Shares”) to be held in a virtual-only format on June 13, 2023 at 9:00 a.m. (Vancouver time).

The Transaction

At the CMMC Meeting, the CMMC Shareholders will be asked to consider a resolution (the “Arrangement Resolution”) regarding a plan of arrangement of CMMC (the “Transaction”) whereby all of the issued and outstanding CMMC Shares will be acquired by Hudbay Minerals Inc. (“Hudbay”) for common shares of Hudbay (the “Hudbay Shares”) for consideration per CMMC Share equal to 0.381 of a Hudbay Share.

This combination represents an opportunity to combine two companies to create a leading Americas-focused copper producer. Following completion of the Transaction, the combined company (the “Combined Company”) will have increased scale and an enhanced portfolio with three long-life operating mines with exploration and expansion upside, three large-scale development projects and one of the largest mineral resource bases among intermediate copper producers. The Combined Company is expected to produce 150,000 tonnes of copper in 2023 at cash costs in the second quartile of the copper cost curve. The Combined Company will also be a best-in-class copper company with a geographically balanced portfolio in tier-one mining jurisdictions (Peru, Canada and the United States), with approximately 55% of net asset value estimated to be from North American assets and 45% of net asset value estimated to be from South American assets.

CMMC Shareholders will benefit from significant accretion to cash flows, as the Combined Company will have greater cash flow generation and a stronger balance sheet. In addition, upon closing of the Transaction, the Combined Company is expected to generate an estimated US$30 million per year of operating efficiencies and corporate synergies, resulting in further financial and operational benefits. Moreover, in a market that values scale and trading liquidity, the combination of CMMC and Hudbay will create the third largest copper producer in Canada, with an implied market capitalization of approximately US$2.3 billion (based on the closing prices of Hudbay Shares and CMMC Shares on the TSX on April 12, 2023, being the business day immediately preceding the announcement of the Transaction), thereby supporting an enhanced capital markets profile and improved trading liquidity. Ultimately, the strategic and financial benefits from the Transaction are expected to position the Combined Company for a valuation re-rating.

CMMC and Hudbay share a strong commitment to operating with the highest ESG principles. The Copper Mountain Mine has set a goal of net-zero carbon emissions by 2035 which is underlined by Hudbay’s overall commitment to achieve net-zero by 2050. With operations in the lower half of the global greenhouse gas emissions curve for copper mines, and through the sharing of expertise in carbon reduction initiatives and innovation, the Combined Company is well positioned to become a leader in ESG initiatives.

The Combined Company’s Board of Directors will include two directors from the CMMC Board, and the management team will include select members from the management team of CMMC. The Combined Company will therefore be led by a team of experienced mining and business leaders from both companies with complementary skills, strengths and capabilities.

Details of the Transaction, which will proceed by way of a plan of arrangement, and of the issuance of Hudbay Shares as consideration to CMMC Shareholders in connection with the Transaction, are described in more detail in the accompanying Notice of Special Meeting of Shareholders of CMMC and the accompanying joint management information circular of Hudbay and CMMC dated May 15, 2023 (the “Circular”). The Circular includes additional information to assist you in considering how to vote on the proposed Arrangement Resolution, including risk factors relating to the completion of the Transaction. You should carefully review and consider all of the information in the Circular. If you require assistance, consult your financial, legal, tax or other professional advisor.


Recommendation of the CMMC Board

The CMMC Board, having undertaken a thorough review of, and having carefully considered the terms of the Transaction, and after consulting with its financial and legal advisors, including having received and taken into account the fairness opinions received from CIBC World Markets Inc. and Origin Merchant Partners, the unanimous recommendation of the special committee of the CMMC Board and such other matters as it considered necessary and relevant, including the factors set out in the Circular under the heading “The Arrangement – Reasons for the Arrangement” and “The ArrangementAdditional CMMC Reasons”, has unanimously determined that the Transaction is in the best interests of CMMC.

Accordingly, the CMMC Board has unanimously concluded that the Transaction is in the best interests of CMMC and recommends that you vote FOR the Arrangement Resolution.

YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF CMMC SHARES YOU OWN.

Whether or not you expect to attend the CMMC Meeting, we encourage you to take the time to complete, sign, date and return the enclosed form of proxy or voting instruction form, as applicable, in accordance with the instructions set out therein so that your CMMC Shares can be voted at the CMMC Meeting. See “Information Concerning the CMMC Meeting” of the Circular for more information.

Proxies must be submitted (in accordance with the instructions set out on the form of proxy) no later than 9:00 a.m. (Vancouver time) on June 9, 2023, or on the day other than a Saturday, Sunday or statutory or civic holiday which is at least 48 hours prior to any adjourned or postponed CMMC Meeting. A completed voting instruction form should be deposited in accordance with the instructions printed on the form. The deadline for depositing proxies may be waived or extended by the Chair of the CMMC Meeting at his or her discretion, without notice.

If CMMC Shareholders have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

On behalf of the CMMC Board, I would like to express our gratitude for the support our CMMC Shareholders have demonstrated with respect to our decision to undertake this Transaction. We believe that this opportunity will be transformative for both CMMC and Hudbay shareholders and will create a premier Americas-focused copper producer.

 

Yours very truly,

(Signed) “Gilmour Clausen

Gilmour Clausen

Director, President and Chief Executive Officer

Copper Mountain Mining Corporation


HUDBAY MINERALS INC.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF HUDBAY

NOTICE IS HEREBY GIVEN that a special meeting (the “Hudbay Meeting”) of the holders (the “Hudbay Shareholders”) of common shares (the “Hudbay Shares”) of Hudbay Minerals Inc. (“Hudbay”) will be held in a virtual-only format, which will be conducted via live webcast available online, at https://web.lumiagm.com/265891707 on June 13, 2023 at 10:30 a.m. (Toronto time), subject to any adjournment(s) or postponement(s) thereof, for the following purposes:

 

1.

to consider, and if deemed advisable, to pass, with or without variation, an ordinary resolution (the “Hudbay Resolution”), the full text of which is set forth in Appendix A to the accompanying joint management information circular (the “Circular”) of Hudbay and Copper Mountain Mining Corporation (“CMMC”) dated May 15, 2023, approving the issuance by Hudbay of such number of Hudbay Shares as may be required to be issued pursuant to or in connection with the plan of arrangement under Part 9, Division 5 of the Business Corporations Act (British Columbia) among CMMC and Hudbay (the “Arrangement”), in accordance with the terms of the arrangement agreement dated April 13, 2023 between Hudbay and CMMC (as amended, supplemented or otherwise modified from time to time, the “Arrangement Agreement”), as more particularly described in the Circular; and

 

2.

to transact such other business, including amendments to the foregoing, as may properly be brought before the Hudbay Meeting and any adjournment or postponement thereof.

The board of directors of Hudbay (the “Hudbay Board”) unanimously recommends that Hudbay Shareholders vote FOR the Hudbay Resolution. It is a condition to the completion of the Arrangement that the Hudbay Resolution be approved at the Hudbay Meeting. If the Hudbay Resolution is not approved by the Hudbay Shareholders the Arrangement cannot be completed.

Each Hudbay Share entitled to be voted in respect of the Hudbay Resolution will entitle the holder to one vote at the Hudbay Meeting. The Hudbay Resolution must be approved by at least a simple majority of the votes cast by Hudbay Shareholders present virtually or represented by proxy and entitled to vote at the Hudbay Meeting.

The Arrangement Agreement has been filed under Hudbay’s and CMMC’s respective issuer profiles on SEDAR at www.sedar.com and under Hudbay’s issuer profile on EDGAR at www.sec.gov. This Notice of Special Meeting of Shareholders of Hudbay is accompanied by the Circular which contains additional information relating to matters to be dealt with at the Hudbay Meeting.

The Hudbay Board has set the close of business (Toronto time) on April 28, 2023 as the record date (the “Hudbay Record Date”) for determining the Hudbay Shareholders who are entitled to receive notice of and vote at the Hudbay Meeting. Only persons shown on the register of Hudbay Shareholders at the close of business (Toronto time) on the Hudbay Record Date, or their duly appointed proxyholders, will be entitled to receive notice of the Hudbay Meeting and vote on the Hudbay Resolution.

Important Notice Regarding the Virtual Meeting

Hudbay will be conducting a virtual-only Hudbay Meeting via live webcast at https://web.lumiagm.com/265891707. Hudbay Shareholders will not be able to attend the Hudbay Meeting in person. At the Hudbay Meeting, Registered Hudbay Shareholders (“Registered Hudbay Shareholders”) and their duly appointed proxyholders will be able to participate, ask questions and vote in “real time” through an online portal at https://web.lumiagm.com/265891707. All Hudbay Shareholders who wish to attend the Hudbay Meeting must carefully follow the procedures set out in the Circular in order to vote and ask questions through the live webcast. Non-registered beneficial Hudbay Shareholders (“Non-Registered Hudbay Shareholders”), unless you appoint yourself as a proxyholder and register with TSX Trust by e-mailing tsxtrustproxyvoting@tmx.com the “Request for control number”


form, which can be found at https://tsxtrust.com/resource/en/75, will be able to listen to the live webcast of the Hudbay Meeting, but will not be able to ask questions or vote during the Hudbay Meeting. Hudbay believes that a virtual meeting gives all Hudbay Shareholders an equal opportunity to participate regardless of their geographic location or the particular constraints and circumstances that they face. Hudbay Shareholders are strongly encouraged to submit their completed form of proxy (in the case of Registered Hudbay Shareholders) or voting instruction form (in the case of Non-Registered Hudbay Shareholders), or alternatively, to vote over the Internet or by other means, in each case, well in advance of the Hudbay Meeting and in accordance with the enclosed instructions so that as many Hudbay Shares as possible are represented at the Hudbay Meeting.

As a Hudbay Shareholder, it is important that you read this Notice of Special Meeting of Shareholders of Hudbay and accompanying Circular carefully and then vote your Hudbay Shares. Proxies to be used or acted upon at the Hudbay Meeting must be completed and deposited with Hudbay’s transfer agent, TSX Trust Company (“TSX Trust”), in accordance with the instructions thereon. To be effective, a duly completed proxy must be received by TSX Trust by 10:30 a.m. (Toronto time) on June 9, 2023 (or by 10:30 a.m. (Toronto time) on the day other than a Saturday, Sunday or statutory or civic holiday which is at least 48 hours prior to any adjourned or postponed Hudbay Meeting). Hudbay Shareholders may vote online, by telephone or by mail following the instructions found in the enclosed form of proxy or voting instruction form. Late proxies may be accepted or rejected by the chair of the Hudbay Meeting in his or her discretion. The time limit for the deposit of proxies may be waived or extended by the chair of the Hudbay Meeting, at the chair’s discretion, with or without notice. The chair is under no obligation to accept or reject any particular late proxy. Non-Registered Hudbay Shareholders holding Hudbay Shares through an Intermediary may have an earlier deadline by which the intermediary or broker must receive voting instructions. Non-Registered Hudbay Shareholders that hold Hudbay Shares through an intermediary or broker and receive these materials through such intermediary or broker should complete and send the form of proxy or voting instruction form in accordance with the instructions provided by such intermediary or broker.

Hudbay Shareholders that have any questions or need additional information regarding the voting of their Hudbay Shares should consult their financial, legal, tax or other professional advisor.

If Hudbay Shareholders have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-866-581-1571 (toll-free in North America) or 1-416-623-2514 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.HudbayPOA.com.

Your vote is very important, regardless of the number of Hudbay Shares that you own. Whether or not you expect to attend the Hudbay Meeting, we encourage you to vote your form of proxy or voting instruction form, as applicable, as promptly as possible to ensure that your vote will be counted at the Hudbay Meeting.

 

THE HUDBAY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HUDBAY SHAREHOLDERS VOTE FOR THE HUDBAY RESOLUTION

DATED at Toronto, Ontario, this 15th day of May, 2023.

 

BY ORDER OF THE BOARD OF DIRECTORS OF HUDBAY MINERALS INC.

(signed) “Stephen A. Lang”

Stephen A. Lang

Chair of the Hudbay Board


COPPER MOUNTAIN MINING CORPORATION

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF COPPER MOUNTAIN

NOTICE IS HEREBY GIVEN that, pursuant to an order (the “Interim Order”) of the Supreme Court of British Columbia (the “Court”) dated May 15, 2023, a special meeting (the “CMMC Meeting”) of the holders (the “CMMC Shareholders”) of common shares (the “CMMC Shares”) of Copper Mountain Mining Corporation (“CMMC”) will be held in a virtual-only format which will be conducted via live webcast available online using a virtual shareholder meeting platform at www.virtualshareholdermeeting.com/CMMC2023 on June 13, 2023 at 9:00 a.m. (Vancouver time), subject to any adjournment(s) or postponement(s) thereof, for the following purposes:

 

1.

to consider, pursuant to the Interim Order, and if deemed advisable, to pass, with or without variation, a special resolution (the “Arrangement Resolution”), the full text of which is set forth in Appendix B to the accompanying joint management information circular (the “Circular”) of Hudbay Minerals Inc. (“Hudbay”) and CMMC dated May 15, 2023, approving a statutory plan of arrangement (the “Arrangement”) under Part 9, Division 5 of the Business Corporations Act (British Columbia) (the “BCBCA”) involving, among others, Hudbay and CMMC, in accordance with the terms of the arrangement agreement dated April 13, 2023 between Hudbay and CMMC (as amended, supplemented or otherwise modified from time to time, the “Arrangement Agreement”), as more particularly described in the Circular; and

 

2.

to transact such other business, including amendments to the foregoing, as may properly be brought before the CMMC Meeting and any adjournment or postponement thereof.

The board of directors of CMMC (the “CMMC Board”) unanimously recommends that CMMC Shareholders vote FOR the Arrangement Resolution. It is a condition to the completion of the Arrangement that the Arrangement Resolution be approved at the CMMC Meeting. If the Arrangement Resolution is not approved by the CMMC Shareholders, the Arrangement cannot be completed.

Each CMMC Share entitled to be voted in respect of the Arrangement Resolution will entitle the holder to one vote at the CMMC Meeting. The Arrangement Resolution must be approved by (a) at least two-thirds of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, and (b) a simple majority of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, excluding the votes required to be excluded by Multilateral Instrument 61-101Protection of Minority Security Holders in Special Transactions, as more fully described in the Circular.

The Arrangement Agreement has been filed under CMMC’s issuer profile on SEDAR at www.sedar.com. This Notice of Special Meeting of Shareholders of CMMC is accompanied by the Circular which contains additional information relating to matters to be dealt with at the CMMC Meeting.

The CMMC Board has set the close of business (Vancouver time) on April 25, 2023 as the record date (the “CMMC Record Date”) for determining the CMMC Shareholders who are entitled to receive notice of and vote at the CMMC Meeting. Only persons shown on the register of CMMC Shareholders at the close of business (Vancouver time) on the CMMC Record Date will be entitled to receive notice of the CMMC Meeting and vote on the Arrangement Resolution.

CMMC will be conducting a virtual-only CMMC Meeting via live webcast at www.virtualshareholdermeeting.com/CMMC2023, as authorized by, and in accordance with, the Interim Order. CMMC Shareholders will not be able to attend the CMMC Meeting in person. At the CMMC Meeting, registered CMMC Shareholders (“Registered CMMC Shareholders”) and their duly appointed proxyholders will be able to participate, ask questions and vote in “real time” through the online portal at www.virtualshareholdermeeting.com/CMMC2023. All CMMC Shareholders who wish to attend the CMMC Meeting must carefully follow the procedures set out in the Circular in order to vote and ask questions through the live webcast. Non-registered beneficial CMMC Shareholders (“Non-Registered CMMC Shareholders”), unless they have been duly appointed as proxyholders in accordance with the


procedures set out in the Circular, and holders of CMMC CHESS Depositary Interests (as defined in the Settlement Operating Rules of the Australian Securities Exchange) (“CMMC CDIs”) will be able to listen to the live webcast of the CMMC Meeting, but will not be able to ask questions or vote during the CMMC Meeting. CMMC believes that a virtual meeting gives all CMMC Shareholders an equal opportunity to participate regardless of their geographic location. CMMC Shareholders and holders of CMMC CDIs are strongly encouraged to submit their completed form of proxy (in the case of Registered CMMC Shareholders) or voting instruction form (in the case of Non-Registered CMMC Shareholders (other than CMMC CDI holders)) or the CMMC CDI voting instruction form (“CDI VIF”) received from Computershare Investor Services Pty Limited (“Computershare Australia”) (in the case of holders of CMMC CDIs), or alternatively, to vote over the Internet or by other means, in each case, well in advance of the CMMC Meeting and in accordance with the enclosed instructions, so that as many CMMC Shares as possible are represented at the CMMC Meeting.

As a CMMC Shareholder, it is important that you read this Notice of Special Meeting of Shareholders of CMMC and accompanying Circular carefully and then vote your CMMC Shares. Proxies to be used or acted upon at the CMMC Meeting must be completed and deposited with CMMC’s meeting provider, Broadridge Financial Solutions, Inc. (“Broadridge”), in accordance with the instructions thereon. To be effective, a duly completed proxy must be received by Broadridge by 9:00 a.m. (Vancouver time) on June 9, 2023 (or by 9:00 a.m. (Vancouver time) on the day other than a Saturday, Sunday or statutory or civic holiday which is at least 48 hours prior to any adjourned or postponed CMMC Meeting). CMMC Shareholders may vote online, by telephone or by mail following the instructions found in the enclosed form of proxy or voting instruction form. Late proxies may be accepted or rejected by the chair of the CMMC Meeting in his or her discretion. The chair is under no obligation to accept or reject any particular late proxy. The time limit for deposit of proxies may be waived or extended by the chair of the CMMC Meeting, at the chair’s discretion, with or without notice. Non-Registered CMMC Shareholders (other than holders of CMMC CDIs) holding CMMC Shares through an intermediary or broker may have an earlier deadline by which the intermediary or broker must receive voting instructions. Non-Registered CMMC Shareholders (other than holders of CMMC CDIs) that hold CMMC Shares through an intermediary or broker and receive these materials through such intermediary or broker should complete and send the form of proxy or voting instruction form in accordance with the instructions provided by such intermediary or broker.

Holders of CMMC CDIs that receive a CDI VIF from Computershare Australia are requested to complete and return the CDI VIF in accordance with the instructions provided by Computershare Australia. If you do not complete and return the form or vote online in accordance with such instructions, you may lose your right to direct the voting of your CMMC CDIs at the CMMC Meeting on your behalf.

Pursuant to the Interim Order, Registered CMMC Shareholders entitled to vote at the CMMC Meeting have a right to dissent with respect to the Arrangement Resolution and, if the Arrangement becomes effective, to be paid an amount equal to the fair value of their CMMC Shares as of the close of business (Vancouver time) on the day before the Arrangement Resolution was approved, provided that they have strictly complied with the dissent procedures set out under Part 8, Division 2 of the BCBCA, as modified by the plan of arrangement (the “Plan of Arrangement”, a copy of which is attached in Appendix E to the Circular) and the Interim Order. A Registered CMMC Shareholder wishing to exercise rights of dissent with respect to the Arrangement Resolution must send to CMMC a written objection to the Arrangement Resolution, which written objection must be received by CMMC, at Suite 1700—700 West Pender Street Vancouver, British Columbia, Canada, V6C 1G8, Attention: Matt Langford, Vice President, General Counsel and Corporate Secretary, with a copy to CMMC’s counsel, Davies Ward Phillips & Vineberg LLP, Attention: Melanie Shishler and Richard Fridman, 155 Wellington Street West, Toronto, Ontario, M5V 3J7, not later than 4:00 p.m. (Vancouver time) on June 9, 2023 (or the day that is two business days immediately preceding the date that any adjourned or postponed CMMC Meeting is reconvened or held, as the case may be), and must otherwise strictly comply with the dissent procedures prescribed by the BCBCA, as modified by the Plan of Arrangement and the Interim Order. A CMMC Shareholder’s right to dissent is more particularly described in the Circular. A copy of the Interim Order and the text of Part 8, Division 2 of the BCBCA are set forth in Appendix C and Appendix M, respectively, to the Circular.


Failure to strictly comply with the requirements set forth in Part 8, Division 2 of the BCBCA, as modified by the Plan of Arrangement and the Interim Order, may result in the loss of any right to dissent. Non-Registered CMMC Shareholders who wish to dissent should be aware that only Registered CMMC Shareholders entitled to vote at the CMMC Meeting are entitled to dissent in respect of the Arrangement Resolution. Registered CMMC Shareholders may only dissent with respect to all of their CMMC Shares held on behalf of any one such beneficial holder and registered in the name of such dissenting CMMC Shareholder. Accordingly, a Non-Registered CMMC Shareholder desiring to exercise the right to dissent must make arrangements for the CMMC Shares beneficially owned by such Non-Registered CMMC Shareholder to be registered in such Non-Registered CMMC Shareholder’s name prior to the time the written objection to the Arrangement Resolution is required to be received by CMMC or, alternatively, make arrangements for the registered holder of such CMMC Shares to dissent on the Non-Registered CMMC Shareholder’s behalf. It is strongly suggested that any CMMC Shareholder wishing to dissent seek independent legal advice, as the failure to strictly comply with the provisions of Part 8, Division 2 of the BCBCA, as modified by the Plan of Arrangement and the Interim Order, may prejudice such CMMC Shareholder’s right to dissent.

CMMC Shareholders that have any questions or need additional information regarding the voting of their CMMC Shares should consult their financial, legal, tax or other professional advisor.

If CMMC Shareholders have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

Your vote is very important, regardless of the number of CMMC Shares that you own. Whether or not you expect to attend the CMMC Meeting, we encourage you to vote your form of proxy, voting instruction form, or CDI VIF, as applicable, as promptly as possible to ensure that your vote will be counted at the CMMC Meeting.

 

THE COPPER MOUNTAIN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT COPPER MOUNTAIN SHAREHOLDERS VOTE FOR THE ARRANGEMENT RESOLUTION

DATED at Vancouver, British Columbia, this 15th day of May, 2023.

 

BY ORDER OF THE BOARD OF DIRECTORS OF COPPER MOUNTAIN MINING CORPORATION

(signed) “Edward Dowling”

Edward Dowling

Chairman of the Board of Directors


COPPER MOUNTAIN MINING CORPORATION

SPECIAL MEETING OF CMMC SHAREHOLDERS CDI VOTING PROCESS

The common shares (the “CMMC Shares”) of Copper Mountain Mining Corporation (“CMMC”) are listed on the Australian Securities Exchange (the “ASX”) in the form of CMMC CHESS Depositary Interests (as defined in the Settlement Operating Rules of the ASX) (“CMMC CDIs”), being a unit of beneficial ownership in a CMMC Share that is registered in the name of CHESS Depositary Nominees Pty Ltd. (“CDN”), a wholly-owned subsidiary of ASX Limited. CMMC would like to remind CMMC CDI holders of the particular requirements and restrictions that their votes will be subject to. Each CMMC CDI is a unit of beneficial ownership of one CMMC Share. CMMC CDI holders do not actually own direct legal title to their CMMC Shares, which are held for and on behalf of CMMC CDI holders by CDN. This structure exists because CMMC is a Canadian company with a right to have its securities traded on the ASX by way of CMMC CDIs.

This arrangement impacts how CMMC CDI holders can record their votes for the matters to be tabled at the CMMC Meeting. As CMMC CDIs represent beneficial ownership of CMMC Shares, which are registered in the name of CMMC CDI holders by CDN, CMMC CDI holders need to provide confirmation of their voting intentions to CDN before the CMMC Meeting. CDN will then exercise the votes on behalf of CMMC CDI holders. If a CMMC CDI holder wishes to vote, they must register their vote with CDN by using the CMMC CDI Voting Instruction Form (“CDI VIF”) provided by Computershare Investor Services Pty Limited (“Computershare Australia”).

If CMMC CDI holders have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

To have a CMMC CDI vote counted, CMMC CDI holders must return their completed CDI VIF to Computershare Australia by no later than 5:00 p.m. (Perth time) on June 7, 2023. This deadline has been set to allow sufficient time to collate the votes of CMMC CDI holders and submit them to CMMC’s meeting provider, Broadridge Financial Solutions, Inc., not later than 9:00 a.m. (Vancouver time) on June 9, 2023 (or by 9:00 a.m. (Vancouver time) on the day other than a Saturday, Sunday or statutory or civic holiday which is at least 48 hours prior to any adjourned or postponed CMMC Meeting).

CMMC encourages CMMC CDI holders to lodge their votes ahead of the CMMC Meeting in the manner specified above.

DATED at Vancouver, British Columbia, this 15th day of May, 2023.

 

BY ORDER OF THE BOARD OF DIRECTORS OF COPPER MOUNTAIN MINING CORPORATION

(signed) “Edward Dowling”

Edward Dowling

Chairman of the Board of Directors


TABLE OF CONTENTS

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF HUDBAY

     1  

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF COPPER MOUNTAIN

     1  

SPECIAL MEETING OF CMMC SHAREHOLDERS CDI VOTING PROCESS

     1  

JOINT MANAGEMENT INFORMATION CIRCULAR

     1  

Introduction

     1  

Information Contained in this Circular

     1  

Information Concerning Hudbay

     2  

Information Concerning CMMC

     2  

Solicitation of Proxies

     2  

Enforcement in Canada

     3  

Scientific and Technical Information

     3  

Information for United States Shareholders

     4  

Information for Australian Shareholders

     7  

Information for Shareholders not Resident in Canada

     9  

Non-GAAP Financial Performance Measures

     9  

Third Party Data

     10  

Currency Exchange Rates

     10  

Cautionary Statement Regarding Forward-Looking Statements

     11  

HUDBAY SHAREHOLDERS QUESTIONS AND ANSWERS

     14  

CMMC SHAREHOLDERS QUESTIONS AND ANSWERS

     24  

SUMMARY

     35  

The Arrangement

     35  

Background to the Arrangement

     35  

Recommendation of the Hudbay Board

     35  

Recommendation of the CMMC Special Committee

     36  

Recommendation of the CMMC Board

     36  

Reasons for the Arrangement

     36  

CMMC Fairness Opinions

     42  

Hudbay Fairness Opinion

     44  

Support and Voting Agreements

     45  

Procedure for the Arrangement to Become Effective

     45  

Treatment of CMMC Incentive Awards

     45  

Effective Date of the Arrangement

     47  

Procedure for Exchange of CMMC Shares for Hudbay Shares and Letter of Transmittal

     47  

Procedure for Exchange of CMMC CDIs for Hudbay Shares

     48  

Extinction of Rights

     48  

No Fractional Shares

     49  

Shareholder Approvals

     49  

Court Approval of the Arrangement

     49  

Key Regulatory Matters

     50  

Stock Exchange Listings Approval and Delisting Matters

     50  

Arrangement Agreement

     51  

Interests of Certain Persons in the Arrangement

     52  

Information Concerning the Hudbay Meeting

     52  

Information Concerning the CMMC Meeting

     53  

Dissenting Shareholder Rights

     53  

Information Concerning Hudbay

     54  

Information Concerning CMMC

     54  

Information Concerning Hudbay Following the Arrangement

     55  

Risk Factors

     56  

Certain Income Tax Consequences of the Arrangement

     56  

THE ARRANGEMENT

     57  

Background to the Arrangement

     57  

Recommendation of the Hudbay Board

     68  

Recommendation of the CMMC Special Committee

     68  

Recommendation of the CMMC Board

     68  

Reasons for the Arrangement

     68  

Additional Hudbay Reasons

     70  

Additional CMMC Reasons

     72  

CMMC Fairness Opinions

     75  

Hudbay Fairness Opinion

     76  

Support and Voting Agreements

     77  

 

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Arrangement Mechanics

     79  

Timing for Completion of the Arrangement

     83  

Procedure for Exchange of CMMC Shares for Hudbay Shares and Letter of Transmittal

     83  

Procedure for Exchange of CMMC CDIs for Hudbay Shares

     85  

Extinction of Rights

     85  

No Fractional Shares

     86  

Lost Certificates

     86  

Mail Service Interruptions

     86  

Withholding Rights

     86  

Treatment of Dividends

     87  

Adjustment of Consideration

     87  

Return of CMMC Shares

     87  

Expenses

     88  

Shareholder Approvals

     88  

Court Approval of the Arrangement

     89  

Key Regulatory Matters

     89  

Stock Exchange Listing Approval and Delisting Matters

     91  

THE ARRANGEMENT AGREEMENT

     92  

Conditions to Closing

     92  

Effective Date of the Arrangement

     95  

Outside Date

     95  

Representations and Warranties

     95  

Covenants

     96  

Termination of the Arrangement Agreement

     101  

Amendments

     104  

SECURITIES LAW MATTERS

     106  

Interests of Certain Persons in the Arrangement

     106  

Other Canadian Securities Law Considerations

     114  

United States Securities Law Considerations

     114  

Australian Securities Law Considerations

     115  

INFORMATION CONCERNING THE HUDBAY MEETING

     117  

Purpose of the Hudbay Meeting

     117  

Who Can Vote

     118  

Voting Hudbay Shares and Participating at the Hudbay Meeting

     118  

Voting Hudbay Shares by Proxy

     120  

Additional Matters Presented at the Hudbay Meeting

     122  

Voting Shares and Principal Holders

     122  

INFORMATION CONCERNING THE CMMC MEETING

     123  

Purpose of the CMMC Meeting

     123  

Virtual CMMC Meeting

     124  

Attending and Participating at the CMMC Meeting

     124  

Appointment and Revocation of Proxies

     125  

Voting of Proxies and Exercise of Discretion

     126  

Voting by Registered CMMC Shareholders

     127  

Voting by Non-Registered CMMC Shareholders

     127  

Voting by CMMC CDI Holders

     128  

CMMC Record Date

     128  

Quorum

     128  

CMMC Shares and Principal Holders Thereof

     128  

Other Business

     129  

DISSENTING SHAREHOLDER RIGHTS

     129  

INFORMATION CONCERNING HUDBAY

     132  

INFORMATION CONCERNING CMMC

     132  

INFORMATION CONCERNING HUDBAY FOLLOWING THE ARRANGEMENT

     133  

Notice to Reader

     133  

General

     133  

Description of the Business

     133  

Corporate Structure

     134  

Description of Capital Structure

     135  

Dividend Policy and Capital Allocation

     136  

Directors and Officers of Hudbay the Completion of the Arrangement

     137  

Principal Holders of Hudbay Shares Upon Completion of the Arrangement

     137  

Auditor, Transfer Agent and Registrar

     137  

 

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Material Contracts

     137  

Risk Factors

     137  

RISK FACTORS

     138  

Risk Factors Relating to the Arrangement

     138  

Risk Factors Relating to the Combined Company

     142  

INCOME TAX CONSIDERATIONS

     145  

Certain Canadian Federal Income Tax Considerations

     145  

Certain United States Federal Income Tax Considerations

     150  

Exchange of CMMC Shares for the Hudbay Shares Pursuant to the Arrangement

     151  

Ownership and Disposition of Hudbay Shares

     152  

Foreign Tax Credit

     153  

Receipt of Foreign Currency

     153  

PFIC Considerations

     154  

Backup Withholding and Information Reporting

     155  

Certain Other Income Tax Considerations

     156  

LEGAL MATTERS

     156  

HUDBAY DIRECTORS’ APPROVAL

     157  

CMMC DIRECTORS’ APPROVAL

     158  

CONSENTS

     159  

Consent of Origin Merchant Partners

     159  

Consent of CIBC World Markets Inc.

     160  

Consent of TD Securities Inc.

     161  

GLOSSARY OF TERMS

     162  

APPENDICES

  

APPENDIX A HUDBAY RESOLUTION

     A-1  

APPENDIX B ARRANGEMENT RESOLUTION

     B-1  

APPENDIX C INTERIM ORDER

     C-1  

APPENDIX D NOTICE OF HEARING OF PETITION FOR THE FINAL ORDER AND PETITION

     D-1  

APPENDIX E PLAN OF ARRANGEMENT

     E-1  

APPENDIX F HUDBAY VIRTUAL MEETING USER GUIDE

     F-1  

APPENDIX G CMMC VIRTUAL MEETING USER GUIDE

     G-1  

APPENDIX H ORIGIN FAIRNESS OPINION

     H-1  

APPENDIX I CIBC FAIRNESS OPINION

     I-1  

APPENDIX J TD SECURITIES FAIRNESS OPINION

     J-1  

APPENDIX K INFORMATION CONCERNING HUDBAY

     K-1  

APPENDIX L INFORMATION CONCERNING CMMC

     L-1  

APPENDIX M PART 8, DIVISION 2 OF THE BUSINESS CORPORATIONS ACT (BRITISH COLUMBIA)

     M-1  

 

 

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JOINT MANAGEMENT INFORMATION CIRCULAR

Introduction

This joint management information circular (the “Circular”) is furnished in connection with the solicitation of proxies by and on behalf of the management of Hudbay and CMMC for use at the Hudbay Meeting to be held at 10:30 a.m. (Toronto time) on June 13, 2023 and the CMMC Meeting to be held at 9:00 a.m. (Vancouver time) on June 13, 2023, respectively, and any adjournment(s) or postponement(s) thereof. Capitalized terms used but not otherwise defined in this Circular have the meanings ascribed thereto under “Glossary of Terms” in this Circular.

The Hudbay Meeting will be accessible online at https://web.lumiagm.com/265891707 starting at 10:30 a.m. (Toronto time) on June 13, 2023. The CMMC Meeting will be accessible online at www.virtualshareholdermeeting.com/CMMC2023 starting at 9:00 a.m. (Vancouver time) on June 13, 2023. Each of Hudbay and CMMC is holding the Hudbay Meeting and the CMMC Meeting, respectively, as a completely virtual meeting, which will be conducted via live webcast, where all shareholders regardless of geographic location will have an equal opportunity to participate at the meeting online. Shareholders will not be able to attend the Hudbay Meeting or the CMMC Meeting in person. For more information on how to attend and participate in the Hudbay Meeting or the CMMC Meeting online, please see the Notice of Special Meeting of Shareholders of Hudbay and the Notice of Special Meeting of Shareholders of CMMC, respectively. See also “Information Concerning the Hudbay Meeting” and “Information Concerning the CMMC Meeting”.

No Person has been authorized to give any information or make any representation in connection with the Arrangement and the issuance of Hudbay Shares in connection with the Arrangement, or any other matters to be considered at the Hudbay Meeting or the CMMC Meeting, as applicable, or discussed in or incorporated by reference in this Circular other than those contained in this Circular and, if given or made, any such information or representation must not be relied upon as having been authorized by Hudbay or CMMC and should not be relied upon in making a decision as to how to vote on the resolutions to be considered at the Hudbay Meeting or CMMC Meeting, as applicable. For greater certainty, to the extent that any information contained or provided on Hudbay’s or CMMC’s websites or by Hudbay’s and CMMC’s joint proxy solicitation agent is inconsistent with this Circular, you should rely on the information provided in this Circular.

Information contained on Hudbay’s or CMMC’s websites is not and is not deemed to be a part of this Circular or incorporated by reference herein and should not be relied upon in making a decision as to how to vote on the resolutions to be considered at the Hudbay Meeting or CMMC Meeting, as applicable.

This document is important and requires your immediate attention. If you have any questions or require assistance, you should consult your investment dealer, broker, bank manager, lawyer or other professional advisor.

Information Contained in this Circular

Descriptions in this Circular of the terms of the Interim Order, Plan of Arrangement, Origin Fairness Opinion, CIBC Fairness Opinion and TD Securities Fairness Opinion, attached to this Circular as Appendix C, Appendix E, Appendix H, Appendix I, and Appendix J, respectively, and the Arrangement Agreement and the forms of Support and Voting Agreements, which have been filed under Hudbay’s and CMMC’s respective issuer profiles on SEDAR at www.sedar.com and under Hudbay’s issuer profile on EDGAR at www.sec.gov, are summaries of the terms of those documents and are qualified in their entirety by reference to the full text of each of these documents. You are urged to carefully read the full text of these documents. In the event of any inconsistency between the summary of any provision of these documents contained in this Circular and the actual text of the document, the text of the applicable document shall govern.

Information contained in this Circular is given as at May 15, 2023 unless otherwise specifically stated and except that information in documents incorporated by reference is given as of the dates noted therein.


This Circular does not constitute an offer to sell, or a solicitation of an offer to purchase any securities or the solicitation of a proxy, in any jurisdiction, to or from any Person to whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction. Neither the delivery of this Circular nor any distribution of the securities referred to in this Circular will, under any circumstances, imply or represent that there has been no change in the information set forth herein since the currency date of such information as set out in this Circular.

Information contained in this Circular should not be construed as legal, tax or financial advice and Hudbay Shareholders and CMMC Shareholders are urged to consult with their own professional advisors in considering the relevant legal, tax, financial or other matters contained in this Circular.

THIS CIRCULAR AND THE TRANSACTIONS CONTEMPLATED BY THE ARRANGEMENT AGREEMENT AND THE PLAN OF ARRANGEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY SECURITIES REGULATORY AUTHORITY NOR HAS ANY SECURITIES REGULATORY AUTHORITY PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTIONS OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS AN OFFENCE.

Information Concerning Hudbay

Except as otherwise indicated, the information concerning Hudbay contained in this Circular has been provided by Hudbay and should be read together with, and is qualified by, the documents of Hudbay incorporated by reference herein. Although CMMC has no knowledge that any statements contained herein taken from or based on such information provided by Hudbay are untrue or incomplete, neither CMMC nor any of its officers or directors assumes any responsibility for the completeness or accuracy of such information, nor any failure by Hudbay or any of its affiliates or representatives to disclose facts or events which may have occurred or may affect the completeness or accuracy of any such information but which are unknown to CMMC. In accordance with the Arrangement Agreement, Hudbay provided all necessary information concerning Hudbay that is required by Law to be included in this Circular and ensured that such information does not contain any Misrepresentations.

Information Concerning CMMC

Except as otherwise indicated, the information concerning CMMC contained in this Circular has been provided by CMMC and should be read together with, and is qualified by, the documents of CMMC incorporated by reference herein. Although Hudbay has no knowledge that any statements contained herein taken from or based on such information provided by CMMC are untrue or incomplete, neither Hudbay nor any of its officers or directors assumes any responsibility for the completeness or accuracy of such information, nor any failure by CMMC or any of its affiliates or representatives to disclose facts or events which may have occurred or may affect the completeness or accuracy of any such information but which are unknown to Hudbay. In accordance with the Arrangement Agreement, CMMC provided all necessary information concerning CMMC that is required by Law to be included in this Circular and ensured that such information does not contain any Misrepresentations.

Solicitation of Proxies

To encourage your vote participation, you may be contacted by directors, officers, employees, consultants or agents of Hudbay or CMMC, as applicable, by telephone, e-mail, Internet, facsimile, in person or by other means of communication, or by CMMC and Hudbay’s joint proxy solicitation agent, Kingsdale Advisors, in connection with this Circular and the Arrangement. The total cost of mailing the Hudbay Meeting Materials to Hudbay Shareholders will be borne by Hudbay. The total cost of mailing the CMMC Meeting Materials to CMMC Shareholders and holders of CMMC CDIs will be borne by CMMC. Hudbay and CMMC have engaged Kingsdale Advisors as their strategic shareholder advisor and proxy solicitation agent and will pay fees of approximately C$200,000, in aggregate, to Kingsdale Advisors for proxy solicitation services in addition to certain out-of-pocket expenses. Kingsdale Advisors’ fee will be borne in equal amounts by Hudbay and CMMC. Hudbay and CMMC may also reimburse brokers and other persons holding Shares in their name or in the name of nominees for their costs incurred in sending proxy material to their principals in order to obtain their proxies.

 

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Hudbay Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-866-581-1571 (toll-free in North America) or 1-416-623-2514 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.HudbayPOA.com.

CMMC Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

Hudbay and CMMC may utilize the Broadridge QuickVoteTM system, which involves NOBOs being contacted by Kingsdale Advisors, which is soliciting proxies on behalf of Hudbay and CMMC, to obtain voting instructions over the telephone and relaying them to Broadridge (on behalf of the NOBO’s Intermediary). While representatives of Kingsdale Advisors are soliciting proxies on behalf of Hudbay and CMMC, Shareholders are not required to vote in the manner recommended by the Hudbay Board or the CMMC Board, as applicable. The QuickVoteTM system is intended to assist Shareholders in placing their votes, however, there is no obligation for any Shareholder to vote using the QuickVoteTM system, and such Shareholders may vote (or change or revoke their votes) at any other time and in any other applicable manner described in this Circular. Any voting instructions provided by a Shareholder will be recorded and such Shareholder will receive a letter from Broadridge (on behalf of the Shareholder’s Intermediary) as confirmation that their voting instructions have been accepted.

Hudbay and CMMC will not be relying on the notice-and-access delivery procedures outlined in NI 54-101 to distribute copies of proxy-related materials in connection with the Hudbay Meeting or the CMMC Meeting. Hudbay and CMMC will pay for an Intermediary to deliver copies of proxy-related materials in connection with the Hudbay Meeting and the CMMC Meeting, respectively, to “objecting beneficial owners”.

Enforcement in Canada

Certain of the directors and officers of Hudbay and CMMC as well as certain experts referenced in this Circular and the documents incorporated by reference herein reside outside of Canada. It may not be possible for shareholders of Hudbay or CMMC to effect service of process within Canada upon such Persons. Shareholders are advised that it may not be possible to enforce judgments obtained in Canada against any Person that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada.

Scientific and Technical Information

All mineral reserves and mineral resources for Hudbay and CMMC have been estimated in accordance with the NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum definitions and classification system (the “CIM Standards”). All mineral resources are reported exclusive of mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimation of “measured” and “indicated” mineral resources involves greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable mineral reserves. The estimation of “inferred” mineral resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of mineral resources. It cannot be assumed that all or any part of a “measured”, “indicated” or “inferred” mineral resource will ever be upgraded to a higher category or converted into a mineral “reserve”. Under Canadian rules, estimates of “inferred mineral resources” may not form the basis of feasibility studies, pre-feasibility studies or other economic studies, except in prescribed cases, such as in a preliminary economic assessment under certain circumstances. Investors are cautioned not to assume that any part or all of a “measured”, “indicated” or “inferred” mineral resource exists or is economically or legally mineable. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues. The

 

- 3 -


quantity and grade of reported inferred mineral resources in this estimation are uncertain in nature and there has been insufficient exploration to define these inferred mineral resources as an indicated or measured mineral resource and it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category. Inferred mineral resources are considered too speculative geologically to have the economic considerations applied to enable them to be categorized as mineral reserves.

Additional information about each of CMMC’s material mineral projects including information regarding data verification, key assumptions, parameters and methods used to estimate mineral reserves and mineral resources and the risks that could materially affect the development of the mineral reserves and mineral resources can be found in the CMMC AIF filed on SEDAR and in the following technical report filed on SEDAR in respect of CMMC’s material mineral property, “Life-of-Mine Plan and 65 kt/d Expansion Study Update NI 43-101 Technical Report, Princeton, British Columbia” on the Copper Mountain Mine, with an effective date of August 1, 2022 (filed on September 30, 2022).

Additional information about each of Hudbay’s material mineral projects including information regarding data verification, key assumptions, parameters and methods used to estimate mineral reserves and mineral resources and the risks that could materially affect the development of the mineral reserves and mineral resources can be found in the Hudbay AIF filed on SEDAR and EDGAR and in the following technical reports filed on SEDAR in respect of Hudbay’s material mineral properties: (a) “NI 43-101 Technical Report, Constancia Mine, Cuzco, Peru” on the Constancia mine, with an effective date of January 1, 2021 (filed on March 29, 2021); (b) “NI 43-101 Technical Report, Lalor and Snow Lake Operations, Manitoba, Canada”, on the Lalor mine, with an effective date of January 1, 2021 (filed on March 29, 2021); and (c) “Preliminary Economic Assessment, Copper World Complex, Prima County, Arizona, USA” NI 43-101 Technical Report on the Copper World project, with an effective date of May 1, 2022 (filed on July 14, 2022).

In addition, all mineral reserves and mineral resources of CMMC released to ASX have been estimated and reported on in accordance with JORC. Additional information regarding these disclosures is available under CMMC’s issuer profile at www.asx.com.au.

The current technical reports for each of the material mineral properties of Hudbay and CMMC are available under each of Hudbay’s and CMMC’s respective issuer profiles on SEDAR at www.sedar.com.

Information for United States Shareholders

THE SECURITIES TO BE ISSUED PURSUANT TO THE ARRANGEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR THE SECURITIES REGULATORY AUTHORITIES OF ANY STATE OF THE UNITED STATES, NOR HAS THE SEC OR THE SECURITIES REGULATORY AUTHORITIES OF ANY STATE OF THE UNITED STATES PASSED ON THE ADEQUACY OR ACCURACY OF THIS CIRCULAR OR THE FAIRNESS OR MERITS OF THE PLAN OF ARRANGEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.

The offer and sale of the Consideration Shares issuable to CMMC Shareholders and CMMC CDI holders in exchange for their CMMC Shares and CMMC CDIs, respectively, and the offer and sale of the Hudbay Replacement Options issuable in exchange for CMMC Options, in each case pursuant to the Arrangement, have not been and will not be registered under the U.S. Securities Act or any U.S. state Securities Laws, and such securities will be issued in reliance upon the Section 3(a)(10) Exemption and exemptions from applicable U.S. state Securities Laws. The Section 3(a)(10) Exemption exempts the issuance of any securities issued in exchange for one or more bona fide outstanding securities from the general requirement of registration under the U.S. Securities Act where the terms and conditions of the issuance and exchange of such securities have been approved by a court of competent jurisdiction that is expressly authorized by law to grant such approval, after a hearing upon the substantive and procedural fairness of the terms and conditions of such issuance and exchange at which all Persons to whom it is proposed to issue the securities have the right to appear and receive timely notice thereof. The Court is authorized to conduct a hearing at which the fairness of the terms and conditions of the Arrangement will be considered.

 

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The Final Order, if granted, will constitute the basis for an exemption from the registration requirements of the U.S. Securities Act pursuant to the Section 3(a)(10) Exemption with respect to the issuance of the Consideration Shares issuable to CMMC Shareholders and CMMC CDI holders in exchange for their CMMC Shares and CMMC CDIs, respectively, and the issuance of Hudbay Replacement Options to holders of CMMC Options in exchange for their CMMC Options, pursuant to the Arrangement upon completion of the Arrangement. The Court has been informed of this effect of the Final Order.

The solicitation of proxies for the Hudbay Meeting and the CMMC Meeting by means of this Circular is not subject to the requirements of section 14(a) of the U.S. Exchange Act, based upon exemptions from the SEC’s proxy solicitation rules applicable to “foreign private issuers” (as such term is defined in Rule 3b-4 under the U.S. Exchange Act). Accordingly, the solicitation of proxies and transactions contemplated in this Circular are being made in the United States in accordance with Canadian corporate Laws and Canadian Securities Laws, and this Circular has been prepared solely in accordance with disclosure requirements applicable in Canada. Hudbay Shareholders and CMMC Shareholders in the United States should be aware that such requirements are different from those of the United States applicable to registration statements under the U.S. Securities Act and proxy statements under the U.S. Exchange Act.

The Consideration Shares received by CMMC Shareholders and CMMC CDI holders, as applicable, pursuant to the Arrangement (which, for avoidance of doubt, does not include the Hudbay Shares issuable upon exercise of the Hudbay Replacement Options) will be freely tradable under the U.S. Securities Act after the completion of the Arrangement, except by Persons who are “affiliates” (as defined in Rule 144 of the U.S. Securities Act) of Hudbay following completion of the Arrangement or who were affiliates of Hudbay within 90 days prior to the completion of the Arrangement. The Consideration Shares issued to CMMC Shareholders and CMMC CDI holders who are such affiliates (or former affiliates) of Hudbay may be subject to the registration requirements of the U.S. Securities Act, absent an exemption or exclusion therefrom, such as the exemptions contained in Rule 144 or Rule 904 of Regulation S. See “Securities Law Matters – United States Securities Law Considerations”. Persons who may be deemed to be “affiliates” of an issuer include individuals or entities that control, are controlled by, or are under common control with, the issuer, whether through the ownership of voting securities, by contract, or otherwise, and generally include executive officers and directors of the issuer as well as principal shareholders of the issuer. Typically, persons who are directors, executive officers or 10% or greater shareholders of an issuer are considered to be its “affiliates”.

The exemption from the registration requirements of the U.S. Securities Act provided by the Section 3(a)(10) Exemption does not exempt the issuance of securities upon the exercise of securities that were previously issued pursuant to the Section 3(a)(10) Exemption or were issued pursuant to another exemption from registration under the U.S. Securities Act. Therefore, the Hudbay Shares issuable upon exercise of the Hudbay Replacement Options to be issued pursuant to the Arrangement may not be issued in reliance upon the Section 3(a)(10) Exemption and the Hudbay Replacement Options may be exercised only pursuant to an available exemption from the registration requirements of the U.S. Securities Act and applicable U.S. state Securities Laws. Prior to the issuance of any Hudbay Shares pursuant to any such exercise, Hudbay may require evidence (which may include an opinion of counsel) reasonably satisfactory to Hudbay to the effect that the issuance of such Hudbay Shares does not require registration under the U.S. Securities Act or applicable U.S. state Securities Laws.

The Hudbay Shares issued upon exercise of the Hudbay Replacement Options by holders in the United States or who are U.S. Persons will be “restricted securities”, as such term is defined in Rule 144 under the U.S. Securities Act, and may not be resold unless such securities are registered under the U.S. Securities Act and all applicable U.S. state Securities Laws or unless an exemption from such registration requirements is available.

Information concerning the properties and operations of each of Hudbay and CMMC have been prepared in accordance with the requirements of Canadian Securities Laws, which differ from the requirements of U.S. Securities Laws. Mineral reserve and mineral resource estimates included or incorporated by reference in this Circular have been prepared in accordance with NI 43-101 and the CIM Standards. NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects.

 

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Canadian standards, including NI 43-101, differ from the requirements of the SEC that are applicable to domestic U.S. reporting companies. Any mineral reserves and mineral resources reported by each of Hudbay and CMMC in accordance with NI 43-101 may not qualify as such under SEC standards. Accordingly, information concerning descriptions of mineralization and mineral resources contained herein may not be comparable to information made public by U.S. companies subject to the current reporting and disclosure requirements of the SEC.

Further to recent amendments, mineral property disclosure requirements in the United States are governed by subpart 1300 of Regulation S-K of the Securities Act of 1933, as amended (the “U.S. Rules”) which differ from the CIM Standards. As a “foreign private issuer” (as such term is defined in Rule 3b-4 under the U.S. Exchange Act) that files its annual report on Form 40-F with the SEC pursuant to the U.S.-Canada Multijurisdictional Disclosure System (“MJDS”), Hudbay is not required to provide disclosure on its mineral properties under the U.S. Rules and will continue to provide disclosure under NI 43-101 and the CIM Standards. If Hudbay ceases to be a foreign private issuer or loses its eligibility to file its annual report on Form 40-F pursuant to the MJDS, then Hudbay will be subject to the U.S. Rules which differ from the requirements of NI 43-101 and the CIM Standards.

The historical financial statements of Hudbay and CMMC included or incorporated by reference in this Circular have been prepared in accordance with IFRS. Thus, such financial statements are not directly comparable to financial statements of United States companies which are prepared in accordance with U.S. GAAP. This Circular does not include an explanation of the principal differences between, or any reconciliation of, IFRS and U.S. GAAP. Investors should consult with their own professional advisors for an understanding of the differences between IFRS and U.S. GAAP, and of how those differences might affect the financial information presented herein. Auditors of financial statements for Hudbay are required to be independent in accordance with U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. Hudbay’s financial statements are audited in accordance with the standards of the PCAOB and CMMC’s financial statements are audited in accordance with Canadian auditing standards.

CMMC Shareholders and holders of CMMC CDIs subject to United States federal taxation should be aware that the Arrangement and the acquisition, ownership and disposition of Consideration Shares may have material tax consequences in the United States, including, without limitation, the possibility that the Arrangement is a taxable transaction for United States federal income tax purposes. See “Income Tax Considerations – Certain United States Federal Income Tax Considerations”. CMMC Shareholders and holders of CMMC CDIs should consult their own tax advisors to determine the particular tax consequences to them of participating in the Arrangement and the ownership and disposition of Hudbay Shares acquired pursuant to the Arrangement.

The enforcement by Hudbay Shareholders, CMMC Shareholders and holders of CMMC CDIs of civil liabilities under U.S. Securities Laws may be affected adversely by the fact that Hudbay is organized under the Laws of Canada, and CMMC is organized under the Law of British Columbia, Canada, each being a jurisdiction outside the United States, that some or all of the officers and directors of Hudbay and CMMC, respectively, are residents of countries other than the United States, that some or all of the experts named in this Circular and the documents incorporated by reference herein are residents of countries other than the United States and that all or a substantial portion of the assets of Hudbay, CMMC and such Persons are located outside the United States. As a result, it may be difficult or impossible for Hudbay Shareholders, CMMC Shareholders and holders of CMMC CDIs in the United States to effect service of process within the United States upon Hudbay, CMMC, their respective directors or officers or such experts, or to realize, against them, upon judgments of courts of the United States predicated upon civil liabilities under the federal securities Laws of the United States or “blue sky” Laws of any state within the United States. In addition, Hudbay Shareholders, CMMC Shareholders and holders of CMMC CDIs in the United States should not assume that the courts of Canada: (a) would enforce judgments of United States courts obtained in actions against such Persons predicated upon civil liabilities under the federal Securities Laws of the United States or “blue sky” Laws of any state within the United States; or (b) would enforce, in original actions, liabilities against such Persons predicated upon civil liabilities under the federal Securities Laws of the United States or “blue sky” Laws of any state within the United States.

 

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Information for Australian Shareholders

THE CONSIDERATION SHARES ISSUABLE TO CMMC SHAREHOLDERS IN AUSTRALIA PURSUANT TO THE ARRANGEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY ASIC. NEITHER ASIC NOR THE ASX TAKES ANY RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THE CONTENT OF THIS CIRCULAR OR THE FAIRNESS OR MERITS OF THE PLAN OF ARRANGEMENT.

Not a Prospectus

This Circular is not, and is not required to be, a prospectus under the Australian Corporations Act. It has been prepared to address requirements of the Laws of the relevant provinces and territories of Canada and its content may not be the same, or presented in the same manner, as information in a prospectus.

Not Australian Shares

Similar to CMMC and the CMMC Shares, Hudbay is not an Australian company and the Hudbay Shares are not shares in an Australian company. Consequently, Hudbay is only regulated under the Australian Corporations Act to a limited extent as a foreign company. Hudbay is subject to the Laws of Canada, and is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut. Accordingly, rights of Hudbay Shareholders in Australia will be determined predominantly under the Laws of Canada and the relevant Canadian provinces and territories.

No ASX Listing

Unlike the CMMC Shares (which are listed on the ASX by way of the CMMC CDIs), the Hudbay Shares are not, and after completion of the Arrangement will not be, listed on the ASX.

Rights and Entitlements of CMMC CDIs

CMMC CDI holders will receive Hudbay Shares pursuant to the Plan of Arrangement. It is anticipated that after the necessary shareholder and court approvals are obtained and closing of the Arrangement is ready to be initiated, trading in CMMC CDIs will go into voluntary suspension for a period of approximately three trading days in anticipation of closing of the Arrangement. During that time, the ability to transmute CMMC CDIs into the underlying CMMC Shares, and vice versa, is expected to be restricted. Following the Arrangement, the Hudbay Shares will not be listed on the ASX.

JORC Code Warning

Hudbay is not, and after completion of the Arrangement will not be, required to report on minerals exploration results, mineral resources and ore reserves in accordance with the JORC Code. As noted above, mineral reserve and mineral resource estimates included or incorporated by reference in this Circular have been prepared in accordance with NI 43-101 and the CIM Standards. The CIM Standards are closely related to the JORC Code in their key definitions. The Hudbay mineral reserve and mineral resource estimates can therefore be quoted as “qualifying foreign estimates” according to ASX Listing Rules. The most recent disclosure of Hudbay’s mineral resources can be found under Hudbay’s issuer profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov, in the document titled “Annual Information Form for the year ended December 31, 2022” released on March 30, 2023. The qualifying foreign estimates have not been reported in accordance with the JORC Code. A competent Person has not done sufficient work to classify the qualifying foreign estimates as mineral resources or ore reserves in accordance with the JORC Code. It is uncertain whether following evaluation and/or further exploration work, the qualifying foreign estimates would be able to be reported as mineral resources or ore reserves in accordance with the JORC Code.

 

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As noted above, CIM definitions are substantially similar to the JORC Code corresponding definitions. It is not expected that estimates prepared in accordance with NI 43-101 and the CIM Standards would be materially different to estimates prepared in accordance with the JORC Code. However, unlike the JORC Code, NI 43-101 would permit publication of technical reports containing a preliminary economic assessment where economic analysis is substantially or entirely based on inferred mineral resources.

General Advice Warning

This Circular does not constitute financial product advice and has been prepared without reference to individual investment objectives, financial situation, taxation position or particular needs of any Hudbay Shareholder or CMMC Shareholder or any other Person. Neither Hudbay nor CMMC holds an Australian financial service licence. It is important that you read this Circular, and consider your particular investment needs, objectives and financial circumstances, before making any decision, including a decision on whether or not to vote in favour of the Arrangement. This Circular should not be relied upon as the sole basis for any such decision.

Presentation of Financial Information

The financial statements and other financial information of Hudbay and CMMC included or incorporated by reference in this Circular may have some differences compared to financial statements of Australian companies which are prepared in accordance with AASB and audited in accordance with Australian Auditing Standards. This Circular does not include an explanation of the principal differences between, or any reconciliation of, IFRS and AASB. Some additional disclosures required by AASB may not be included in the financial statements and other financial information included or incorporated by reference in this Circular. Investors should consult with their own professional advisors for an understanding of the differences between IFRS and AASB, and of how those differences might affect the financial information presented herein.

Australian Tax

CMMC Shareholders who are tax residents of Australia should be aware that the Arrangement and disposal of the CMMC Shares or CMMC CDIs and the ownership and future disposition of Hudbay Shares may have tax consequences in Australia, including, without limitation, the possibility that the disposal of CMMC Shares and/or CMMC CDIs pursuant to the Arrangement is a taxable transaction, in whole or in part, for Australian income tax purposes. Such CMMC Shareholders (or those who may otherwise potentially be within the scope of Australian tax) should consult their own professional tax advisors to determine the particular Australian tax consequences to them (including Australian income tax, goods and services tax and stamp duty) of participating in the Arrangement and the acquisition, ownership and future disposition of Hudbay Shares acquired pursuant to the Arrangement.

Enforcement Warning

The enforcement by Hudbay Shareholders and CMMC Shareholders of any applicable Laws of Australia, including Laws as to misleading conduct, or the common law including Laws relating to negligence, may be affected adversely by the fact that Hudbay and CMMC are organized under the Laws of Canada and British Columbia, Canada, respectively, being jurisdictions outside Australia, that some or all of the officers and directors of Hudbay and CMMC, respectively, are residents of countries other than Australia, that some or all of the experts named in this Circular and the documents incorporated by reference herein are residents of countries other than Australia and that some or all of the assets of Hudbay, CMMC and such Persons are located outside Australia. As a result, it may be difficult for Hudbay Shareholders and CMMC Shareholders in Australia to take action in Australian federal or state courts and under Australian Law against Hudbay, CMMC and such Persons. In addition, Hudbay Shareholders and CMMC Shareholders in Australia cannot be assured that the courts of Canada would enforce judgements of Australian courts obtained in actions under the Laws of Australia against such Persons.

Privacy and Personal Information

Hudbay, CMMC and their respective agents will need to collect personal information from CMMC Shareholders to implement the Arrangement. The personal information may include the names, contact details and details of shareholdings of CMMC Shareholders, as well as their representatives or proxies appointed for the purposes of the CMMC Meeting.

 

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CMMC Shareholders in Australia who are individuals, and other individuals in Australia in respect of whom personal information is collected, have certain rights to access the personal information collected about them and may contact Computershare Australia if they wish to exercise those rights. The information may be disclosed to print and mail service providers, and to Hudbay, CMMC and their respective advisors and agents to the extent necessary to effect the Arrangement, and to registries and other agents and advisors of Hudbay to administer its share register and for all other related or incidental purposes. If this information outlined above is not collected, Hudbay and CMMC may be hindered in, or prevented from, conducting the CMMC Meeting or implementing the Arrangement effectively, or at all. CMMC Shareholders in Australia who appoint an individual as their proxy, body corporate representative or attorney to vote at the CMMC Meeting should inform that individual of the matters outlined above.

Information for Shareholders not Resident in Canada

Hudbay and CMMC are corporations organized under the laws of Canada and the Province of British Columbia, respectively. The solicitation of proxies for the Hudbay Meeting and the CMMC Meeting by means of this Circular involves securities of a Canadian issuer and is being effected in accordance with applicable corporate and securities Laws in Canada. Hudbay Shareholders and CMMC Shareholders should be aware that the requirements applicable to Hudbay and CMMC under Canadian Laws may differ from requirements under corporate and securities Laws relating to corporations in other jurisdictions.

The enforcement of civil liabilities under the securities Laws of other jurisdictions outside Canada may be affected adversely by the fact that Hudbay and CMMC are organized under the laws of Canada and the Province of British Columbia, respectively, the majority of their assets are located in Canada, the United States and Peru, as applicable, and the majority of their directors and executive officers are residents of Canada. You may not be able to sue Hudbay, CMMC and/or their directors or officers in a Canadian court for violations of foreign securities laws. It may be difficult to compel Hudbay and CMMC to subject themselves to a judgment of a court outside Canada.

CMMC Shareholders who are foreign taxpayers should be aware that the Arrangement described in this Circular may have tax consequences both in Canada and such foreign jurisdictions in which they are resident. This Circular does not contain a summary of the non-Canadian federal income tax and non-U.S. federal income tax considerations of the Arrangement for CMMC Shareholders who are subject to income tax outside of Canada or the United States. Such CMMC Shareholders should consult their own tax advisors with respect to the tax implications of the Arrangement, including any associated filing requirements in such jurisdictions.

Non-GAAP Financial Performance Measures

In certain documents incorporated by reference into this Circular, there are references to certain financial performance measures that are not prescribed by IFRS, including adjusted net earnings (loss), adjusted net earnings (loss) per share, adjusted EBITDA, net debt, cash cost, cash costs per pound, C1 cash costs, all-in sustaining costs (AISC), all-in costs (AIC), sustaining and all-in sustaining cash cost per pound of copper produced, cash cost and sustaining cash cost per pound of zinc produced, combined unit cost and zinc plant unit cost, cash cost and sustaining cash cost per ounce of gold produced. These non-GAAP financial performance measures are used because Hudbay and CMMC used the information to analyze the business performance and financial position of Hudbay, CMMC and the Combined Company. These non-GAAP financial performance measures are intended to provide additional information only and do not have any standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. These non-GAAP financial performance measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. See “Non-IFRS Financial Performance Measures” in the Hudbay Annual MD&A and the Hudbay Q1 Interim MD&A, and “Non-GAAP Performance Measures” in the CMMC Annual MD&A and the CMMC Q1 Interim MD&A, copies of which have been filed under Hudbay’s and CMMC’s issuer profiles on SEDAR at www.sedar.com, respectively, for more information, including a reconciliation of non-GAAP financial performance measures to most directly comparable IFRS measures.

 

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Third Party Data

Certain comparisons in this Circular of the Combined Company’s expected 2023 copper production are based on data obtained from Wood Mackenzie as of December 31, 2022. Wood Mackenzie is an independent third party research and consultancy firm that provides data for, among others, the metals and mining industry. Wood Mackenzie has no affiliation to Hudbay or CMMC. Neither Hudbay nor CMMC has the ability to verify Wood Mackenzie figures, and C1 copper costs, as used by Wood Mackenzie, may not correspond to the calculation of such non-GAAP financial performance measure by Hudbay or CMMC.

Currency Exchange Rates

In this Circular, unless otherwise specified or the context otherwise requires, all dollar amounts are expressed in United States dollars and references to “dollars”, “US$” or “$” are to United States dollars, references to “C$” are to Canadian dollars and references to “A$” are to Australian dollars.

The following table sets forth the high and low daily exchange rates for one U.S. dollar expressed in Canadian dollars for each period indicated, the average of the daily exchange rates for each period indicated and the exchange rate at the end of each such period, based upon the daily exchange rates provided by the Bank of Canada:

 

     Three Months Ended
March 31
     Year Ended
December 31
 
     2023      2022      2022      2021  

Rate at end of period

     1.3533        1.2496        1.2678        1.2678  

Average rate during period

     1.3526        1.2662        1.3011        1.2535  

High

     1.3807        1.2867        1.3856        1.2942  

Low

     1.3312        1.2470        1.2451        1.2040  

On April 12, 2023, the business day immediately prior to the announcement that Hudbay and CMMC had entered into the Arrangement Agreement, the average daily exchange rate as reported by the Bank of Canada was $1.00 = C$1.3447 or C$1.00 = $0.7437. On May 12, 2023, the business day immediately prior to the date of this Circular, the average daily exchange rate as reported by the Bank of Canada was $1.00 = C$1.3534 or C$1.00 = $0.7389.

The following table sets forth the high and low daily exchange rates for one U.S. dollar expressed in Australian dollars for each period indicated, the average of the daily exchange rates for each period indicated and the exchange rate at the end of each such period, based upon the daily exchange rates provided by the Reserve Bank of Australia:

 

     Three Months Ended
March 31
     Year Ended
December 31
 
     2023      2022      2022      2021  

Rate at end of period

     1.4899        1.3365        1.4760        1.3782  

Average rate during period

     1.4615        1.3807        1.4395        1.3308  

High

     1.3986        1.3286        1.3132        1.2547  

Low

     1.5172        1.4263        1.6051        1.4235  

On April 12, 2023, the business day immediately prior to the announcement that Hudbay and CMMC had entered into the Arrangement Agreement, the daily exchange rate as reported by the Reserve Bank of Australia was $1.00 = A$1.4990 or A$1.00 = $0.6671. On May 12, 2023, the business day immediately prior to the date of this Circular, the daily exchange rate as reported by the Reserve Bank of Australia was $1.00 = A$1.4948 or A$1.00 = $0.6690.

 

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Cautionary Statement Regarding Forward-Looking Statements

This Circular contains forward-looking statements and forward-looking information within the meaning of applicable Canadian and U.S. securities legislation and which are based on the currently available competitive, financial and economic data and operating plans of management of Hudbay and CMMC as of the date hereof unless otherwise stated. Forward-looking statements are provided for the purpose of presenting information about Hudbay’s and CMMC’s current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Although Hudbay and CMMC believe that expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. These statements relate to future events or future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “forecast”, “objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “seek”, “potential” or the negative of such terms and similar expressions. More particularly and without limitation, this Circular contains forward-looking statements and information concerning: the Hudbay Meeting and CMMC Meeting; the solicitation of proxies by the Parties and their proxy solicitation agent; the reasons for, and anticipated benefits of, the Arrangement to the parties thereto and their respective securityholders, including corporate, operational, financial, scale and other synergies and the timing thereof; the structure, steps, timing and effects of the Arrangement; the Combined Company’s future plans, market and growth profile, operating margins, operating costs and overall strategy and performance; estimates of future copper production; estimates regarding future cost reductions, synergies, including pre-tax synergies and optimization benefits and expectations of improved efficiencies, financial flexibility, future innovation and integration opportunities; expectations regarding future balance sheet strength of the Combined Company; expectations regarding the development of the Combined Company’s development assets and ability to fund growth projects; the deleveraging of the Combined Company and the timing of such deleveraging; the receipt and timing of the Final Order and the Effective Date of the Arrangement; the satisfaction of conditions for listing the Consideration Shares and the Hudbay Shares issuable upon exercise or settlement of the Hudbay Replacement Options on the TSX and the NYSE and the timing thereof; expectations regarding the value, nature, process and timing of delivery of the Consideration Shares to CMMC Shareholders and holders of CMMC CDIs following the Effective Time; the anticipated number of Hudbay Shares to be issued in connection with the Arrangement, including the Hudbay Shares to be issued upon exercise or settlement of the Hudbay Replacement Options; the consequences to CMMC, Hudbay and the holders of CMMC Shares, CMMC CDIs and Hudbay Shares if the Arrangement is not completed; the anticipated timing of the voluntary suspension in trading of CMMC CDIs on the ASX; the availability of the Section 3(a)(10) Exemption for the issuance of the Consideration Shares and Hudbay Replacement Options; the expectation that CMMC will cease to be a reporting issuer following completion of the Arrangement and the delisting of the CMMC Shares and CMMC CDIs from the TSX and the ASX following completion of the Arrangement; the treatment of the CMMC Incentive Awards held by directors and officers of CMMC; the consideration and compensation, if any, to be paid to the directors and officers of CMMC following completion of the Arrangement; the exercise of Dissent Rights by CMMC Shareholders with regards to the Arrangement; the timing, receipt and conditions of required regulatory, Court and shareholder approvals for the Arrangement, including but not limited to the receipt of the CMMC Shareholder Approval and the Hudbay Shareholder Approval; the ability of Hudbay and CMMC to satisfy the other conditions to the Arrangement; the anticipated expenses of the Arrangement; the composition of the shareholders, board of directors and management team of the Combined Company; the governance and management structure of the Combined Company; the corporate and capital structure of the Combined Company; the anticipated capitalization of the Combined Company on a consolidated basis following completion of the Arrangement; the anticipated dividend policy and capital allocation practices of the Combined Company following completion of the Arrangement; the expected operations and capital expenditure plans for the Combined Company following completion of the Arrangement; anticipated Tax treatment of the Arrangement on CMMC Shareholders and holders of CMMC CDIs; the future commodity prices and other events or conditions that may occur in the future.

 

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In respect of the forward-looking statements and forward-looking information concerning the anticipated benefits of the Arrangement and the anticipated timing for completion of the Arrangement, each of Hudbay and CMMC, as applicable, has provided such in reliance on certain assumptions that it believes are reasonable at this time, including assumptions as to the ability of the Parties to receive, in a timely manner and on satisfactory terms, the necessary regulatory, stock exchange, Court and shareholder approvals, including but not limited to the receipt of the CMMC Shareholder Approval, the Hudbay Shareholder Approval and the Final Order; the ability of the Parties to satisfy, in a timely manner, the other conditions to the closing of the Arrangement and the completion of the Arrangement on expected terms; Hudbay’s ability to successfully integrate CMMC in a timely manner following completion of the Arrangement; customer demand for the Combined Company’s products following completion of the Arrangement; the ability of the Combined Company to maintain and grow its mineral resource and mineral reserve base through the development of growth projects and other development assets; the sufficiency of budgeted capital expenditures in carrying out planned operations and activities; the availability and cost of labour and services; the success of the Combined Company’s future operations; future operating costs; the impact of the Arrangement and the dedication of substantial resources from the Parties to pursuing the Arrangement on the Parties’ ability to maintain their current business relationships (including with current and prospective employees, customers, distributors, suppliers and partners) and their current and future operations, financial condition and prospects; no unforeseen changes in the legislative and operating framework for the business of Hudbay and CMMC, as applicable; and other expectations and assumptions concerning the Arrangement and the operations and capital expenditure plans for the Combined Company. The anticipated dates provided may change for a number of reasons, including unforeseen delays in the ability to secure the necessary regulatory, stock exchange, Court or shareholder approvals in the time assumed or the need for additional time to satisfy the other conditions to the completion of the Arrangement. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this Circular, and Hudbay and CMMC can give no assurances that they will prove to be correct.

Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. Risks and uncertainties inherent in the nature of the Arrangement include, among other things: the failure of Hudbay and CMMC to receive, in a timely manner and on satisfactory terms, the necessary regulatory, stock exchange, Court and shareholder approvals, including the CMMC Shareholder Approval, the Hudbay Shareholder Approval and the Final Order; the significant transaction costs or unknown liabilities to otherwise satisfy the conditions to the completion of the Arrangement, in a timely manner, or at all; and the failure to realize the anticipated benefits of the Arrangement in the expected timeframes, or at all. Failure to obtain the regulatory, stock exchange, Court and shareholder approvals, or the failure of the Parties to otherwise satisfy the conditions to or complete the Arrangement, may result in the Arrangement not being completed on the proposed terms, or at all. In addition, if the Arrangement is not completed, and the Parties continue as an independent entity, there are risks that the announcement of the Arrangement and the dedication of substantial resources of the Parties to pursuing the Arrangement, and the diversion of management in the course of pursuing the Arrangement, may adversely impact each Party’s current business relationships (including with current and prospective employees, customers, distributors, suppliers and partners) and its current and future operations, financial condition and prospects. The failure to complete the Arrangement for any reason could also materially negatively impact the trading price of the Parties’ securities. Furthermore, the failure of a Party to comply with the terms of the Arrangement Agreement may, in certain circumstances, result in a Party being required to pay the Hudbay Termination Payment or CMMC Termination Payment to the other Party, as applicable, the result of which will or could have a material adverse effect on such paying Party’s financial position and results of operations and its ability to fund growth prospects and current operations.

Shareholders are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of the Parties are included in reports filed by Hudbay and CMMC, as applicable, with the securities commissions or similar authorities in Canada and the United States (which are available under Hudbay’s and CMMC’s respective issuer profiles on SEDAR at www.sedar.com and under Hudbay’s issuer profile on EDGAR at www.sec.gov), including in the Hudbay AIF, the CMMC AIF, the Hudbay Annual Financial Statements, the CMMC Annual Financial Statements, the Hudbay Annual MD&A, the CMMC Annual MD&A, the Hudbay Q1 Interim Financial Statements and Hudbay Q1 Interim MD&A, and the CMMC Q1 Interim Financial Statements and CMMC Q1 Interim MD&A, each of which is incorporated by reference in this Circular.

 

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The forward-looking statements and forward-looking information contained in this Circular and the documents incorporated by referenced herein are made as of the date of such documents. Hudbay and CMMC are under no obligation (and Hudbay and CMMC expressly disclaim any such obligation) to update or alter any forward-looking statements or forward-looking information, the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by Law. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on the forward-looking statements or forward-looking information and investors are recommended to carefully consider the matters discussed under “Risk Factors” and in the documents incorporated by reference in each of “Appendix K – Information Concerning Hudbay” and “Appendix L – Information Concerning CMMC”. The foregoing statements expressly qualify any forward-looking statements or forward-looking information contained herein.

 

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HUDBAY SHAREHOLDERS

QUESTIONS AND ANSWERS

This Circular is furnished in connection with the solicitation of proxies by or on behalf of management of Hudbay for use at the Hudbay Meeting, to be held at 10:30 a.m. (Toronto time) on June 13, 2023 via live webcast available online using the Lumi virtual meeting platform at https://web.lumiagm.com/265891707 for the purposes indicated in the Notice of Special Meeting of Shareholders of Hudbay. Capitalized terms used but not otherwise defined in this “Hudbay Shareholders Questions and Answers” section have the meanings ascribed thereto under “Glossary of Terms” in this Circular.

Your vote is important. The following are key questions that you as a Hudbay Shareholder may have regarding the proposed Arrangement involving Hudbay, CMMC and the CMMC Shareholders, to be considered at the Hudbay Meeting. The information contained below is of a summary nature and therefore is not complete and is qualified in its entirety by the more detailed information contained elsewhere in, or incorporated by reference in, this Circular, including the Appendices hereto, all of which are important and should be reviewed carefully. You are urged to carefully read the remainder of this Circular as the information in this section does not provide all of the information that might be important to you with respect to the Arrangement. Additional important information is also contained in the Appendices to, and the documents incorporated by reference into, this Circular.

Questions Relating to the Arrangement

 

Q.

What is the proposed transaction?

 

A.

On April 13, 2023, Hudbay and CMMC entered into the Arrangement Agreement pursuant to which the Parties agreed to undertake the Arrangement. The Arrangement is an acquisition by Hudbay of all of the issued and outstanding CMMC Shares (other than CMMC Shares held by Dissenting Shareholders, if any) in exchange for Hudbay Shares by way of a court-approved plan of arrangement under Part 9, Division 5 of the BCBCA. Under the Arrangement, each CMMC Shareholder (other than any Dissenting Shareholders) will receive 0.381 of a Hudbay Share for each CMMC Share or CMMC CDI held. If the Arrangement is completed, CMMC will be an indirect wholly-owned Subsidiary of Hudbay.

 

Q.

What are the reasons for the proposed transaction?

 

A.

In making their respective recommendations, the Hudbay Board and the CMMC Board reviewed and considered a number of factors relating to the Arrangement with the benefit of advice from their respective senior management teams and financial and legal advisors, and, in the case of the CMMC Board, the recommendation of the CMMC Special Committee. For the principal reasons for the respective recommendations of the Hudbay Board and the CMMC Board, see “The Arrangement – Reasons for the Arrangement”.

 

Q.

Has the Hudbay Board unanimously approved the Arrangement?

 

A.

Yes, the Hudbay Board, having undertaken a thorough review of, and having carefully considered the terms of the Arrangement and the Arrangement Agreement, and after consulting with its financial and legal advisors, including having received and taken into account the TD Securities Fairness Opinion and such other matters as it considered necessary and relevant, including the factors set out below under the headings “The Arrangement – Reasons for the Arrangement” and “The Arrangement – Additional Hudbay Reasons”, has unanimously determined that the Arrangement is in the best interests of Hudbay. Accordingly, the Hudbay Board has unanimously approved the Arrangement and the entering into by Hudbay of the Arrangement Agreement and unanimously recommends that the Hudbay Shareholders vote FOR the Hudbay Resolution.

 

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Q.

Does the Hudbay Board recommend that I vote FOR the Hudbay Resolution?

 

A.

Yes, the Hudbay Board unanimously recommends that the Hudbay Shareholders vote FOR the Hudbay Resolution.

 

Q.

Who has agreed to support the Arrangement?

 

A.

CMMC has entered into Hudbay Support and Voting Agreements with the directors and senior officers of Hudbay, pursuant to which the Hudbay Supporting Shareholders have agreed, among other things and subject to the terms and conditions of the Hudbay Support and Voting Agreements, to vote their Hudbay Shares in favour of the Hudbay Resolution to approve the issuance of Hudbay Shares in connection with the Arrangement. As at the Hudbay Record Date, the Hudbay Supporting Shareholders collectively beneficially owned or exercised control or direction over 723,833 Hudbay Shares, representing approximately 0.28% of the issued and outstanding Hudbay Shares.

Hudbay has entered into CMMC Support and Voting Agreements with the directors and certain senior officers of CMMC, pursuant to which the CMMC Supporting Shareholders have agreed, among other things and subject to the terms and conditions of the CMMC Support and Voting Agreements, to vote their CMMC Shares in favour of the Arrangement Resolution. As at the CMMC Record Date, the CMMC Supporting Shareholders collectively beneficially owned or exercised control or direction over 7,886,800 CMMC Shares, representing approximately 3.68% of the issued and outstanding CMMC Shares.

 

Q.

What percentage of the outstanding Combined Company will Hudbay Shareholders and CMMC Shareholders own, respectively, following completion of the Arrangement?

 

A.

Current Hudbay Shareholders and Former CMMC Shareholders are expected to own approximately 76% and 24% of the Hudbay Shares in the Combined Company, respectively, immediately following completion of the Arrangement (on a non-diluted basis), in each case, based on the number of Hudbay Shares and CMMC Shares issued and outstanding as of April 12, 2023 (the business day immediately prior to the announcement of the Arrangement).

 

Q.

If the Arrangement is completed, how many Hudbay Shares will be issued to Former CMMC Shareholders pursuant to the Plan of Arrangement in connection with the Arrangement?

 

A.

The Hudbay Resolution approves the issuance of up to 89,663,961 Hudbay Shares to CMMC Shareholders (including Hudbay Shares issuable to holders of Hudbay Replacement Options upon the exercise thereof and a 5% buffer for administrative and clerical purposes) pursuant to the Plan of Arrangement, which represents 34.2% of the number of Hudbay Shares issued and outstanding as of April 12, 2023. No Hudbay Shares will be issued, or are issuable, to the holders of the CMMC DSUs, CMMC Phantom Options and CMMC Phantom RSUs in connection with the Arrangement. See “Information Concerning Hudbay Following the Arrangement – Description of Capital Structure”.

The TSX will generally not require further Hudbay Shareholder approval for the issuance of up to an additional 22,415,990 Hudbay Shares, such number being 25% of the number of Hudbay Shares approved for issuance pursuant to the Hudbay Resolution.

 

Q.

What is required for the Arrangement to become effective?

 

A.

The obligations of Hudbay and CMMC to consummate the Arrangement and the other transactions contemplated by the Arrangement Agreement are subject to the satisfaction or waiver of a number of conditions, including, among others: (a) approval of the Arrangement Resolution by CMMC Shareholders at the CMMC Meeting in accordance with the Interim Order; (b) approval of the Hudbay Resolution by Hudbay Shareholders at the Hudbay Meeting; (c) the Interim Order and the Final Order having been obtained on terms consistent with the Arrangement Agreement, and not

 

- 15 -


 

having been set aside or modified in a manner unacceptable to either Hudbay or CMMC, each acting reasonably, on appeal or otherwise; (d) conditional approval or authorization of the listing of the Hudbay Shares to be issued in connection with the Arrangement on the TSX and the NYSE, subject only to customary listing conditions, as applicable; (e) the Competition Act Approval remaining in full force and effect (f) no Law being in effect that makes the completion of the Arrangement illegal or otherwise prohibits or enjoins the Parties from the consummating the Arrangement; (g) the Hudbay Shares and the Hudbay Replacement Options to be issued in connection with the Arrangement being exempt from the registration requirements of the U.S. Securities Act pursuant to the Section 3(a)(10) Exemption, and such Hudbay Shares and Hudbay Replacement Options not being “restricted securities” within the meaning of Rule 144 under the U.S. Securities Act and subject only to restrictions on transfer applicable solely as a result of the holder being, or within the 90 days prior to completion of the Arrangement, having been, an affiliate (as defined in Rule 144 under the U.S. Securities Act) of Hudbay except as disclosed in this Circular; (h) the distribution of the Hudbay Shares and the Hudbay Replacement Options to be issued in connection with the Arrangement being exempt from the prospectus and registration requirements of applicable Canadian securities laws; (i) the offer of Hudbay Shares to CMMC Shareholders and holders of CMMC CDIs and Hudbay Replacement Options to holders of CMMC Options resident in Australia being compliant with or otherwise exempt from the prospectus requirements of applicable Australian Securities Laws; and (j) the CMMC Director Nominees being appointed to the Hudbay Board effective as of 11:59 p.m. (Vancouver time) on the Effective Date.

In order to become effective, the Arrangement Resolution must be approved by (a) at least two-thirds of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, and (b) a simple majority of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, excluding the votes required to be excluded by MI 61-101, as described under “Securities Law Matters – Interests of Certain Persons in the Arrangement Multilateral Instrument 61-101”.

In order to become effective, the Hudbay Resolution must be approved by at least a simple majority of the votes cast by Hudbay Shareholders present virtually or represented by proxy at the Hudbay Meeting.

Hudbay has applied to list the Consideration Shares to be issued in connection with the Arrangement (including Hudbay Shares to be issued on the exercise of the Hudbay Replacement Options to be issued pursuant to the Arrangement) on the TSX and the NYSE and has received conditional approval for such listing from the TSX. Final approval of the TSX is conditional on the satisfaction by Hudbay of customary conditions to listing imposed by the TSX. Hudbay anticipates receiving all required authorizations from the NYSE prior to the closing of the Arrangement.

 

Q.

When do you expect the Arrangement to be completed?

 

A.

If approved, the Arrangement will become effective on the Effective Date, which Hudbay and CMMC currently expect to occur in late June 2023. However, completion of the Arrangement is subject to a number of conditions and it is possible that factors outside of the control of Hudbay and/or CMMC could result in the Arrangement being completed at a later time or not at all.

 

Q.

How will I know when all required approvals have been obtained?

 

A.

Hudbay and CMMC will issue a press release once all the necessary approvals have been received and conditions to the completion of the Arrangement have been satisfied or waived, other than conditions that, by their terms, cannot be satisfied until the Effective Time.

 

Q.

What will be the relationship between Hudbay and CMMC after completion of the Arrangement?

 

A.

If the Arrangement is completed, Hudbay will acquire all of the CMMC Shares and CMMC will be an indirect wholly-owned Subsidiary of Hudbay.

 

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Q.

Where will the Hudbay Shares be listed after closing of the Arrangement?

 

A.

The Hudbay Shares are currently, and will continue to be, listed and posted for trading on the TSX and the NYSE under the symbol “HBM”. Hudbay has applied to list the Consideration Shares to be issued in connection with the Arrangement (including Hudbay Shares to be issued on the exercise of the Hudbay Replacement Options to be issued pursuant to the Arrangement) on the TSX and the NYSE and has received conditional approval for such listing from the TSX. Final approval of the TSX is conditional on the satisfaction by Hudbay of customary conditions to listing imposed by the TSX. Hudbay anticipates receiving all required authorizations from the NYSE prior to the closing of the Arrangement.

Unlike the CMMC Shares, the Hudbay Shares are not, and after completion of the Arrangement will not be, listed on the ASX.

 

Q.

Who will be the directors and officers of Hudbay following completion of the Arrangement?

 

A.

Following completion of the Arrangement, the Hudbay Board will consist of 12 directors, comprised of 10 directors from Hudbay and two directors from CMMC. Hudbay will extend offers of employment to two existing senior executives of CMMC to join its existing senior management team. The final composition of the Hudbay Board and the identity of the two senior executives of CMMC that will be extended offers of employment will be determined prior to the Effective Date.

 

Q.

Why am I being asked to approve the Hudbay Resolution?

 

A.

Pursuant to the TSX Company Manual, a listed company is generally required to obtain the approval of its shareholders by ordinary resolution passed by at least a simple majority of the votes cast by shareholders present in person or represented by proxy and entitled to vote in connection with an acquisition transaction where the number of securities issued or issuable in payment of the purchase price for the acquisition exceeds 25% of the number of securities of the listed issuer which are outstanding, on a non-diluted basis, prior to the date of closing of the transaction. Hudbay has reserved approximately 89,663,961 Hudbay Shares for issuance in connection with the Arrangement, which number includes a 5% buffer for administrative and clerical purposes (based on the number of CMMC Shares issued and outstanding on April 12, 2023), representing approximately 34.2% of the issued and outstanding Hudbay Shares on a non-diluted basis as of such date.

 

Q.

What will happen if the Hudbay Resolution is not approved or the Arrangement is not completed for any reason?

 

A.

If the Hudbay Resolution is not approved or the Arrangement is not completed for any reason, the Arrangement Agreement may be terminated and Hudbay will continue to operate independently. In certain circumstances, Hudbay will be required to pay to CMMC the Hudbay Termination Payment in connection with such termination, or CMMC will be required to pay to Hudbay the CMMC Termination Payment in connection with such termination. If the Arrangement is not completed or its completion is materially delayed and/or the Arrangement Agreement is terminated, for any reason, the market price of Hudbay Shares may be materially adversely affected and Hudbay’s business, financial condition or results of operations could also be subject to various material adverse consequences, including that Hudbay would remain liable for costs relating to the Arrangement. See “The Arrangement Agreement – Termination of the Arrangement Agreement” and “Risk Factors”.

 

Q.

Are there any risks I should consider in connection with the Arrangement?

 

A.

Yes. There are a number of risk factors relating to Hudbay’s and CMMC’s respective businesses and operations, the Arrangement and the Combined Company’s business and operations following completion of the Arrangement, all of which should be carefully considered by Hudbay Shareholders in evaluating whether to approve the Hudbay Resolution. In addition to the risk factors

 

- 17 -


 

described under the heading “Risk Factors” in the Hudbay AIF, “Financial Risk Management” in the Hudbay Q1 Interim MD&A and under the heading “Risks and Uncertainties” in the CMMC AIF and CMMC Q1 Interim MD&A, which are specifically incorporated by reference into this Circular, see “Risk Factors” for a non-exhaustive list of certain additional and supplemental risk factors relating to the Arrangement and the business and operations of the Combined Company following completion of the Arrangement which Hudbay Shareholders should carefully consider before voting on the Hudbay Resolution.

Questions Relating to the Hudbay Meeting

 

Q.

Why did I receive this Circular?

 

A.

You received this Circular because you are a Hudbay Shareholder and Hudbay Shareholders will be asked at the Hudbay Meeting to approve the Hudbay Resolution.

 

Q.

How and when is the Hudbay Meeting being held?

 

A.

Hudbay will be holding the Hudbay Meeting in a virtual-only format, which will be conducted via live webcast available online at https://web.lumiagm.com/265891707 on June 13, 2023 at 10:30 a.m. (Toronto time), subject to any adjournment or postponement thereof. Hudbay Shareholders will not be able to attend the Hudbay Meeting in person but will have an equal opportunity to participate in the Hudbay Meeting regardless of geographic location.

 

Q.

How do I attend the Hudbay Meeting?

 

A.

Hudbay will be conducting a virtual meeting, giving you the opportunity to attend the meeting online, using your smartphone, tablet or computer. You will be able to view a live audio webcast of the meeting, ask questions and submit your votes in real time.

By participating online, registered shareholders, non-registered shareholders and guests will be able to listen to a live audio cast of the meeting. Registered shareholders and non-registered shareholders with a registered control number may also ask questions online. Non-registered shareholders can obtain a registered control numbering by appointing themselves as a proxyholder and registering with TSX Trust by e-mailing tsxtrustproxyvoting@tmx.com the “Request for control number” form, which can be found at https://tsxtrust.com/resource/en/75.

 

Q.

Am I entitled to vote?

 

A.

You are entitled to vote if you were a holder of Hudbay Shares as of the close of business (Toronto time) on April 28, 2023, the Hudbay Record Date. Each holder of Hudbay Shares as of the Hudbay Record Date is entitled to one vote per Hudbay Share held on all matters to come before the Hudbay Meeting.

 

Q.

What am I voting on?

 

A.

If you are a holder of Hudbay Shares, you will be voting on the Hudbay Resolution to approve the issuance of Hudbay Shares in connection with the Arrangement, pursuant to the requirements of the TSX. If the Hudbay Resolution is not approved by the requisite vote of Hudbay Shareholders at the Hudbay Meeting, the Arrangement will not be completed.

 

Q.

What constitutes quorum for the Hudbay Meeting?

 

A.

Quorum for the Hudbay Meeting is two individuals present in person virtually, each being a Hudbay Shareholder or a duly appointed proxyholder entitled to vote at the Hudbay Meeting, holding or representing, in the aggregate, at least 25% of the issued and outstanding Hudbay Shares entitled to vote at the Hudbay Meeting.

 

- 18 -


Q.

How many Hudbay Shares are entitled to be voted?

 

A.

As of the Hudbay Record Date, there were 262,053,610 Hudbay Shares outstanding. Each Hudbay Shareholder as of the Hudbay Record Date is entitled to one vote per Hudbay Share held on all matters to come before the Hudbay Meeting.

 

Q.

Does any Hudbay Shareholder beneficially own 10% or more of the Hudbay Shares?

 

A.

To the knowledge of the directors and executive officers of Hudbay, based upon filings made with Canadian or United States securities regulators, there is no Person that beneficially owns, directly or indirectly, or exercises control or direction over, voting securities of Hudbay carrying 10% or more of the voting rights attached to any class of voting securities of Hudbay except GMT Capital Corporation (U.S.), who owned 31,653,920 Hudbay Shares (12.1% of the issued and outstanding Hudbay Shares) as of the Hudbay Record Date.

 

Q.

What if I acquire ownership of Hudbay Shares after the Hudbay Record Date?

 

A.

You will not be entitled to vote Hudbay Shares acquired after the Hudbay Record Date on the Hudbay Resolution. Only Hudbay Shares held as of the Hudbay Record Date are entitled to be voted on the Hudbay Resolution.

 

Q.

What if amendments are made to these matters or if other business matters are brought before the Hudbay Meeting?

 

A.

If you attend the Hudbay Meeting and are eligible to vote, you may vote on the business matters as you choose.

If you have completed and returned a form of proxy, the Persons named in the form of proxy will have discretionary authority to vote on amendments or variations to the matters identified in the Notice of Special Meeting of Shareholders of Hudbay or other matters that may properly come before the Hudbay Meeting, or any adjournment or postponement thereof. At the date of this Circular, management of Hudbay is not aware of any such amendments, variations or other matters which are expected to come before the Hudbay Meeting. However, if any other matter properly comes before the Hudbay Meeting, the accompanying applicable proxy will be voted on such matter in accordance with the best judgment of the Person voting the proxy, including with respect to any amendments or variations to the matters identified in this Circular.

 

Q.

Am I a Registered Hudbay Shareholder?

 

A.

You are a Registered Hudbay Shareholder if you have certificate(s) or DRS Advice(s) representing Hudbay Shares issued in your name and appear as a Registered Hudbay Shareholder on the books of Hudbay.

 

Q.

Am I a Non-Registered Hudbay Shareholder (also commonly referred to as a beneficial shareholder)?

 

A.

You are a Non-Registered Hudbay Shareholder if your Hudbay Shares are registered in the name of an Intermediary. If you are not sure whether you are a Registered Hudbay Shareholder or a Non-Registered Hudbay Shareholder:

Hudbay Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-866-581-1571 (toll-free in North America) or 1-416-623-2514 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.HudbayPOA.com.

 

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Q.

How do I vote if I am a Registered Hudbay Shareholder?

 

A.

If you were a Registered Hudbay Shareholder on the Hudbay Record Date, you may vote online at the virtual Hudbay Meeting at https://web.lumiagm.com/265891707. Click on ‘I have a control number’ and you will be prompted to enter your twelve-digit TSX control number and the password hudbayspecial (case sensitive). You must be connected to the Internet at all times to be able to vote and it is your responsibility to make sure you stay connected for the entire Hudbay Meeting. Registered Hudbay Shareholders as of the Hudbay Record Date who voted prior to the Hudbay Meeting do not need to vote again during the Hudbay Meeting.

Alternatively, you may give another person authority to represent you and vote your Hudbay Shares online at the virtual Hudbay Meeting, as described below under the heading “Information Concerning the Hudbay Meeting Voting Hudbay Shares by Proxy”.

If a Registered Hudbay Shareholder would like to ask a question at the Hudbay Meeting, login using your TSX control number and select the messaging icon. Messages can be submitted at any time during the Q&A session up until the chair of the Hudbay Meeting closes the session. Type your message within the chat box in the top portion of the messaging screen. Once you are happy with your message click the send button.

See “Information Concerning the Hudbay Meeting” in this Circular.

 

Q.

How do I vote if I am a Non-Registered Hudbay Shareholder?

 

A.

It is possible that your Hudbay Shares are registered in the name of an Intermediary, which is usually a trust company, securities broker or other financial institution. If your Hudbay Shares are registered in the name of an Intermediary, you are a non-registered Hudbay Shareholder. Your Intermediary is entitled to vote the Hudbay Shares held by it and beneficially owned by you on the Hudbay Record Date. However, it must first seek your instructions as to how to vote your Hudbay Shares or otherwise make arrangements so that you may vote your Hudbay Shares directly. An Intermediary is not entitled to vote the Hudbay Shares held by it without written instructions from the beneficial owner. As a non-registered Hudbay Shareholder, you may vote your Hudbay Shares through your Intermediary or online at the virtual Hudbay Meeting by taking the appropriate steps, which are the same for OBOs and NOBOs of Hudbay Shares. You are an OBO if you have not allowed your Intermediary to disclose your ownership information to Hudbay. You are a NOBO if you have provided instructions to your Intermediary to disclose your ownership information to Hudbay.

Please note that if you are a Non-Registered Hudbay Shareholder, regardless of whether you are a NOBO or an OBO, and you wish to vote online at the virtual Hudbay Meeting, you will not be recognized at the Hudbay Meeting for the purpose of voting Hudbay Shares registered in the name of an Intermediary unless you appoint yourself as a proxyholder and register with TSX Trust by e-mailing tsxtrustproxyvoting@tmx.com the “Request for control number” form, which can be found at https://tsxtrust.com/resource/en/75 (see “Voting Hudbay Shares by Proxy – Appointing a Proxyholder” below). In order to appoint yourself as proxyholder, you should follow the instructions on the VIF and, in so doing, specify your own name as the person whom you are appointing as proxy for the purposes of voting your Hudbay Shares. You are reminded that any voting instructions should be communicated to your Intermediary in accordance with the procedures set out in the VIF well in advance of the 10:30 a.m. (Toronto time) deadline on June 9, 2023 for the receipt of proxies.

If you are a Non-Registered Hudbay Shareholder and you would like to ask a question at the Hudbay Meeting, login using the TSX control number you received when you appointed yourself a proxyholder and registered with TSX Trust. Questions can be submitted at any time during the Q&A session up until the chair of the Hudbay Meeting closes the session by using the messaging icon. Type your message within the chat box in the top portion of the messaging screen. Once you are happy with your message click the send button.

 

- 20 -


Non-Registered Hudbay Shareholders who have not duly appointed themselves as proxyholder will not be able to vote or ask questions at the Hudbay Meeting; however, such Non-Registered Hudbay Shareholders may still attend the Hudbay Meeting as guests through the live webcast at https://web.lumiagm.com/265891707.

See “Information Concerning the Hudbay Meeting” in this Circular.

 

Q.

How do I vote if I am both a Registered Hudbay Shareholder and a Non-Registered Hudbay Shareholder?

 

A.

Should you hold some Hudbay Shares as a Registered Hudbay Shareholder and others as a Non-Registered Hudbay Shareholder, you will have to use both voting methods described above in order to vote all of your Hudbay Shares.

 

Q.

Who is soliciting my proxy?

 

A.

The management of Hudbay is soliciting your proxy.

The solicitation of proxies is intended to be primarily by mail but may also be made by telephone, e-mail, Internet, fax transmission or other electronic means of communication or in person by the directors, officers, employees and representatives of Hudbay. The total cost of soliciting proxies and mailing the materials in connection with the Hudbay Meeting will be borne by Hudbay. In addition, Hudbay has retained Kingsdale Advisors, on a joint basis with CMMC, to assist it in connection with communicating to Hudbay Shareholders in respect of the Arrangement.

 

Q.

Who votes my Hudbay Shares and how will they be voted if I return a form of proxy?

 

A.

The accompanying form of proxy, when properly signed, confers authority on the Persons named in it as proxies with respect to any amendments or variations to the matters identified in the Notice of Special Meeting of Shareholders of Hudbay or other matters that may properly come before the Hudbay Meeting, or any adjournment or postponement thereof. Notwithstanding the foregoing, the Persons named in the accompanying form of proxy will vote or withhold from voting the Hudbay Shares in respect of which they are appointed in accordance with the direction of the Hudbay Shareholder appointing them, and if the Hudbay Shareholder specifies a choice with respect to any matter to be voted upon, such Hudbay Shareholders’ Hudbay Shares will be voted accordingly. If you sign and return your form of proxy without designating a proxyholder and do not give voting instructions or specify that you want your Hudbay Shares withheld from voting, the Hudbay representatives named in the form of proxy will vote your Hudbay Shares FOR the Hudbay Resolution.

IN THE ABSENCE OF ANY SUCH INSTRUCTION, HUDBAY SHARES REPRESENTED BY PROXIES RECEIVED BY MANAGEMENT WILL BE VOTED FOR THE HUDBAY RESOLUTION.

 

Q.

Can I appoint someone other than those named in the enclosed form of proxy to vote my Hudbay Shares?

 

A.

Yes, you have the right to appoint another Person of your choice. A Hudbay Shareholder that wishes to appoint another Person or entity (who need not be a Hudbay Shareholder) to represent such Hudbay Shareholder at the Hudbay Meeting may either insert the Person or entity’s name in the blank space provided in the form of proxy or complete another proper form of proxy, submit the form of proxy and register such proxyholder with TSX Trust after submitting the form of proxy.

See “Information Concerning the Hudbay Meeting – Appointing a Proxyholder” in this Circular.

 

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Q.

What if my Hudbay Shares are registered in more than one name or in the name of a company?

 

A.

If your Hudbay Shares are registered in more than one name, all registered Persons must sign the form of proxy. If your Hudbay Shares are registered in a company’s name or any name other than your own, you may be required to provide documents proving your authorization to sign the form of proxy for that company or name. For any questions about the proper supporting documents, contact Hudbay’s transfer agent, TSX Trust, before submitting your form of proxy.

 

Q.

Can I revoke a proxy or voting instruction?

 

A.

If you submit a form of proxy, you may revoke it at any time before it is used by doing any one of the following:

 

   

you may send another form of proxy with a later date to TSX Trust, but it must reach the transfer agent no later than 10:30 a.m. (Toronto Time) on June 9, 2023, or 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Hudbay Meeting;

 

   

you may deliver a signed written statement, stating that you want to revoke your form of proxy, to Hudbay’s Corporate Secretary no later than the last business day preceding the Hudbay Meeting or any postponement or adjournment of the Hudbay Meeting, at 25 York Street, Suite 800, Toronto, Ontario, M5J 2V5; or

 

   

you may revoke your form of proxy in any other manner permitted by law.

If as a Registered Hudbay Shareholder you are using your control number to log in to the Hudbay Meeting, you will be provided the opportunity to vote by online ballot at the appropriate time on the matters put forth at the Hudbay Meeting. If you have already voted by proxy and you vote again during the online ballot during the Hudbay Meeting, your online vote during the Hudbay Meeting will revoke your previously submitted proxy. If you have already voted by proxy and do not wish to revoke your previously submitted proxy, do not vote again during the online ballot vote.

Only Registered Hudbay Shareholders have the right to revoke a proxy. Non-Registered Hudbay Shareholders who wish to change their vote must make appropriate arrangements with their respective dealers or other Intermediaries. Late proxies may be accepted or rejected by the chair of the Hudbay Meeting in his discretion, and the chair is under no obligation to accept or reject any particular late proxy.

See “Information Concerning the Hudbay Meeting” in this Circular.

 

Q.

Are CMMC Shareholders required to approve the Arrangement?

 

A.

Yes. Completion of the Arrangement is also conditional upon approval by CMMC Shareholders of the Arrangement Resolution at the CMMC Meeting which is scheduled to be held at 9:00 a.m. (Vancouver time) on June 13, 2023.

In order to become effective, the Arrangement Resolution must be approved by (a) at least two-thirds of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, and (b) a simple majority of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, excluding the votes required to be excluded by MI 61-101, as described under “Securities Law Matters – Interests of Certain Persons in the Arrangement Multilateral Instrument 61-101”. If the Arrangement Resolution is not approved by the requisite vote of the CMMC Shareholders at the CMMC Meeting, the Arrangement will not be completed. CMMC Shareholders will not be asked to vote on any of the matters to be considered and voted upon at the Hudbay Meeting.

 

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Q.

Should I send in my proxy now?

 

A.

Yes. Once you have carefully read and considered the information in this Circular, you should complete and submit the enclosed voting instruction form or form of proxy. You are encouraged to vote well in advance of the proxy cut-off time at 10:30 a.m. (Toronto time) on June 9, 2023 to ensure your Hudbay Shares are voted at the Hudbay Meeting. If the Hudbay Meeting is adjourned or postponed, your proxy must be received not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time of the adjourned or postponed Hudbay Meeting. The time limit for deposit of proxies may be waived or extended by the chair of the Hudbay Meeting at his or her discretion, with or without notice. The chair is under no obligation to accept or reject any particular late proxy.

 

Q.

Who is responsible for counting and tabulating the votes by proxy?

 

A.

Votes by proxy will be counted and tabulated by TSX Trust.

 

Q.

What if I have other questions?

 

A.

Contact Hudbay and CMMC’s joint proxy solicitation agent, Kingsdale Advisors:

Hudbay Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-866-581-1571 (toll-free in North America) or 1-416-623-2514 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.HudbayPOA.com.

CMMC Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

 

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CMMC SHAREHOLDERS QUESTIONS AND ANSWERS

This Circular is furnished in connection with the solicitation of proxies by or on behalf of management of CMMC for use at the CMMC Meeting, to be held at 9:00 a.m. (Vancouver time) on June 13, 2023 in a virtual-only format via live webcast available online using the virtual shareholder meeting platform at www.virtualshareholdermeeting.com/CMMC2023 for the purposes indicated in the Notice of Special Meeting of Shareholders of CMMC. Capitalized terms used but not otherwise defined in this “CMMC Shareholders – Questions and Answers” section have the meanings ascribed thereto under “Glossary of Terms” in this Circular.

Your vote is important. The following are key questions that you as a CMMC Shareholder may have regarding the proposed Arrangement involving Hudbay, CMMC and the CMMC Shareholders, to be considered at the CMMC Meeting. The information contained below is of a summary nature and therefore is not complete and is qualified in its entirety by the more detailed information contained elsewhere in, or incorporated by reference in, this Circular, including the Appendices hereto, all of which are important and should be reviewed carefully. You are urged to carefully read the remainder of this Circular as the information in this section does not provide all of the information that might be important to you with respect to the Arrangement. Additional important information is also contained in the Appendices to, and the documents incorporated by reference into, this Circular.

Questions Relating to the Arrangement

 

Q.

What is the proposed transaction?

 

A.

On April 13, 2023, Hudbay and CMMC entered into the Arrangement Agreement pursuant to which the Parties agreed to undertake the Arrangement. The Arrangement is an acquisition by Hudbay of all of the issued and outstanding CMMC Shares (other than CMMC Shares held by Dissenting Shareholders, if any) in exchange for Hudbay Shares by way of a court-approved plan of arrangement under Part 9, Division 5 of the BCBCA. Under the Arrangement, each CMMC Shareholder (other than any Dissenting Shareholders) will receive 0.381 of a Hudbay Share for each CMMC Share or CMMC CDI held. If the Arrangement is completed, CMMC will be an indirect wholly-owned Subsidiary of Hudbay.

 

Q.

What consideration will I receive in exchange for my CMMC Shares and/or CMMC CDIs?

 

A.

If the Arrangement is completed, CMMC Shareholders and holders of CMMC CDIs (other than any Dissenting Shareholders) will receive 0.381 of a Hudbay Share for each CMMC Share or CMMC CDI held, as the case may be.

 

Q.

What are the reasons for the proposed transaction?

 

A.

In making their respective recommendations, the Hudbay Board and the CMMC Board have reviewed and considered a number of factors relating to the Arrangement with the benefit of advice from their respective senior management teams and financial and legal advisors, and, in the case of the CMMC Board, the recommendation of the CMMC Special Committee. For the principal reasons for the respective recommendations of the Hudbay Board and the CMMC Board, see “The Arrangement – Reasons for the Arrangement”, including the additional factors considered and relied upon by the CMMC Board in making its unanimous recommendation to CMMC Shareholders to vote FOR the Arrangement Resolution.

 

Q.

Has the CMMC Board unanimously approved the Arrangement?

 

A.

Yes, the CMMC Board, having undertaken a thorough review of, and having carefully considered the terms of the Arrangement and the Arrangement Agreement, and after consulting with its financial and legal advisors, including having received and taken into account the CMMC Fairness Opinions, the unanimous recommendation of the CMMC Special Committee and such other

 

- 24 -


 

matters as it considered necessary and relevant, including the factors set out below under the headings “The Arrangement – Reasons for the Arrangement” and “The Arrangement – Additional CMMC Reasons”, unanimously determined that the Arrangement is in the best interests of CMMC and that the Arrangement is fair and reasonable to the CMMC Shareholders. Accordingly, the CMMC Board has unanimously approved the Arrangement and the entering into by CMMC of the Arrangement Agreement and unanimously recommends that the CMMC Shareholders vote FOR the Arrangement Resolution.

 

Q.

Does the CMMC Board recommend that I vote FOR the Arrangement Resolution?

 

A.

Yes, the CMMC Board unanimously recommends that the CMMC Shareholders vote FOR the Arrangement Resolution.

 

Q.

Who has agreed to support the Arrangement?

 

A.

Hudbay has entered into CMMC Support and Voting Agreements with the directors and certain senior officers of CMMC, pursuant to which the CMMC Supporting Shareholders have agreed, among other things and subject to the terms and conditions of the CMMC Support and Voting Agreements, to vote their CMMC Shares in favour of the Arrangement Resolution. As at the CMMC Record Date, the CMMC Supporting Shareholders collectively beneficially owned or exercised control or direction over 7,886,800 CMMC Shares, representing approximately 3.68% of the issued and outstanding CMMC Shares.

CMMC has entered into Hudbay Support and Voting Agreements with the directors and senior officers of Hudbay, pursuant to which the Hudbay Supporting Shareholders have agreed, among other things and subject to the terms and conditions of the Hudbay Support and Voting Agreements, to vote their Hudbay Shares in favour of the Hudbay Resolution to approve the issuance of Hudbay Shares in connection with the Arrangement. As at the Hudbay Record Date, the Hudbay Supporting Shareholders collectively beneficially owned or exercised control or direction over 723,833 Hudbay Shares, representing approximately 0.28% of the issued and outstanding Hudbay Shares.

 

Q.

What percentage of the outstanding Combined Company will Hudbay Shareholders and CMMC Shareholders own, respectively, following completion of the Arrangement?

 

A.

Current Hudbay Shareholders and Former CMMC Shareholders are expected to own approximately 76% and 24% of the Hudbay Shares in the Combined Company, respectively, immediately following completion of the Arrangement (on a non-diluted basis), in each case, based on the number of Hudbay Shares and CMMC Shares issued and outstanding as of April 12, 2023 (the business day immediately prior to the announcement of the Arrangement).

 

Q.

What is required for the Arrangement to become effective?

 

A.

The obligations of Hudbay and CMMC to consummate the Arrangement and the other transactions contemplated by the Arrangement Agreement are subject to the satisfaction or waiver of a number of conditions, including, among others: (a) approval of the Arrangement Resolution by CMMC Shareholders at the CMMC Meeting in accordance with the Interim Order; (b) approval of the Hudbay Resolution by Hudbay Shareholders at the Hudbay Meeting; (c) the Interim Order and the Final Order having been obtained on terms consistent with the Arrangement Agreement, and not having been set aside or modified in a manner unacceptable to either Hudbay or CMMC, each acting reasonably, on appeal or otherwise; (d) conditional approval or authorization of the listing of the Hudbay Shares to be issued in connection with the Arrangement on the TSX and the NYSE, subject only to customary listing conditions, as applicable; (e) the Competition Act Approval remaining in full force and effect (f) no Law being in effect that makes the completion of the Arrangement illegal or otherwise prohibits or enjoins the Parties from the consummating the Arrangement; (g) the Hudbay Shares and the Hudbay Replacement Options to be issued in connection with the Arrangement being exempt from the registration requirements of the U.S. Securities Act pursuant to the Section 3(a)(10) Exemption, and such Hudbay Shares and Hudbay

 

- 25 -


 

Replacement Options not being “restricted securities” within the meaning of Rule 144 under the U.S. Securities Act and subject only to restrictions on transfer applicable solely as a result of the holder being, or within the 90 days prior to completion of the Arrangement, having been, an affiliate (as defined in Rule 144 under the U.S. Securities Act) of Hudbay except as disclosed in this Circular; (h) the distribution of the Hudbay Shares and the Hudbay Replacement Options to be issued in connection with the Arrangement being exempt from the prospectus and registration requirements of applicable Canadian securities laws; (i) the offer of Hudbay Shares to CMMC Shareholders and holders of CMMC CDIs and Hudbay Replacement Options to holders of CMMC Options resident in Australia being compliant with or otherwise exempt from the prospectus requirements of applicable Australian Securities Laws; and (j) the CMMC Director Nominees being appointed to the Hudbay Board effective as of 11:59 p.m. (Vancouver time) on the Effective Date.

In order to become effective, the Arrangement Resolution must be approved by (a) at least two-thirds of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, and (b) a simple majority of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, excluding the votes required to be excluded by MI 61-101, as described under “Securities Law Matters – Interests of Certain Persons in the Arrangement Multilateral Instrument 61-101”.

In order to become effective, the Hudbay Resolution must be approved by at least a simple majority of the votes cast by Hudbay Shareholders present virtually or represented by proxy at the Hudbay Meeting.

Hudbay has applied to list the Consideration Shares to be issued in connection with the Arrangement (including Hudbay Shares to be issued on the exercise of the Hudbay Replacement Options to be issued pursuant to the Arrangement) on the TSX and the NYSE and has received conditional approval for such listing from the TSX. Final approval of the TSX is conditional on the satisfaction by Hudbay of customary conditions to listing imposed by the TSX. Hudbay anticipates receiving all required authorizations from the NYSE prior to the closing of the Arrangement.

 

Q.

When do you expect the Arrangement to be completed?

 

A.

If approved, the Arrangement will become effective on the Effective Date, which Hudbay and CMMC currently expect to occur in late June 2023. However, completion of the Arrangement is subject to a number of conditions and it is possible that factors outside of the control of Hudbay and/or CMMC could result in the Arrangement being completed at a later time or not at all.

 

Q.

How will I know when all required approvals have been obtained?

 

A.

Hudbay and CMMC will issue a press release once all the necessary approvals have been received and conditions to the completion of the Arrangement have been satisfied or waived, other than conditions that, by their terms, cannot be satisfied until the Effective Time.

 

Q.

What will be the relationship between Hudbay and CMMC after completion of the Arrangement?

 

A.

If the Arrangement is completed, Hudbay will acquire all of the CMMC Shares and CMMC will be an indirect wholly-owned Subsidiary of Hudbay.

 

Q.

Where will the Hudbay Shares be listed after closing of the Arrangement?

 

A.

The Hudbay Shares are currently, and will continue to be, listed and posted for trading on the TSX and the NYSE under the symbol “HBM”. Hudbay has applied to list the Consideration Shares to be issued in connection with the Arrangement (including Hudbay Shares to be issued on the exercise of the Hudbay Replacement Options to be issued pursuant to the Arrangement) on the TSX and the NYSE and has received conditional approval for such listing from the TSX. Final approval of the TSX is conditional on the satisfaction by Hudbay of customary conditions to listing imposed by the TSX. Hudbay anticipates receiving all required authorizations from the NYSE prior to the closing of the Arrangement.

 

- 26 -


Unlike the CMMC Shares, the Hudbay Shares are not, and after completion of the Arrangement will not be, listed on the ASX.

 

Q.

Who will be the directors and officers of Hudbay following completion of the Arrangement?

 

A.

Following completion of the Arrangement, the Hudbay Board will consist of 12 directors, comprised of 10 directors from Hudbay and two directors from CMMC. Hudbay will extend offers of employment to two existing senior executives of CMMC to join its existing senior management team. The final composition of the Hudbay Board and the identity of the two senior executives of CMMC that will be extended offers of employment will be determined prior to the Effective Date.

 

Q.

Why am I being asked to approve the Arrangement Resolution?

 

A.

Subject to any order of the Court, the BCBCA requires a corporation that wishes to undergo a court-approved arrangement to obtain, among other consents and approvals, the approval of its shareholders by special resolution passed by at least two-thirds of the votes cast by shareholders present or represented by proxy and entitled to vote on such matter. Pursuant to the Arrangement, Hudbay is acquiring all of the issued and outstanding CMMC Shares (other than CMMC Shares held by Dissenting Shareholders, if any) in exchange for Hudbay Shares by way of a court-approved plan of arrangement under Part 9, Division 5 of the BCBCA involving, among others, Hudbay and CMMC.

 

Q.

What will happen if the Arrangement Resolution is not approved or the Arrangement is not completed for any reason?

 

A.

If the Arrangement Resolution is not approved or the Arrangement is not completed for any reason, the Arrangement Agreement may be terminated and CMMC will continue to operate independently. In certain circumstances, CMMC will be required to pay to Hudbay the CMMC Termination Payment in connection with such termination, or Hudbay will be required to pay to CMMC the Hudbay Termination Payment in connection with such termination. If the Arrangement is not completed or its completion is materially delayed and/or the Arrangement Agreement is terminated, for any reason, the market price of CMMC Shares may be materially adversely affected and CMMC’s business, financial condition or results of operations could also be subject to various material adverse consequences, including that CMMC would remain liable for costs relating to the Arrangement. See “The Arrangement Agreement – Termination of the Arrangement Agreement” and “Risk Factors”.

 

Q.

What are the Canadian federal income tax consequences of the Arrangement?

 

A.

The exchange of a CMMC Share for a Hudbay Share under the Arrangement will generally occur on a tax-deferred basis for Canadian federal income tax purposes.

For a summary of certain of the material Canadian federal income tax consequences of the Arrangement, CMMC Shareholders should review the discussion under “Income Tax Considerations – Certain Canadian Federal Income Tax Considerations”. Such discussion is not intended to be legal, business or tax advice and CMMC Shareholders are urged to consult their own tax advisors as to the tax consequences of the Arrangement to them with respect to their particular circumstances.

 

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Q.

What are the U.S. federal income tax consequences of the Arrangement?

 

A.

Hudbay and CMMC intend to treat the exchange of CMMC Shares for Hudbay Shares pursuant to the Arrangement as part of a tax-deferred “reorganization” within the meaning of section 368 of the U.S. Tax Code. If such exchange qualifies as part of a reorganization, gain or loss generally would not be recognized by U.S. Holders for U.S. federal income tax purposes on their receipt of Hudbay Shares in exchange for CMMC Shares pursuant to the Arrangement. However, neither Hudbay nor CMMC has sought or obtained (or will seek or obtain) either a ruling from the IRS or an opinion of counsel regarding the tax consequences of the Arrangement, and there can be no assurance that the IRS will not challenge the treatment of such exchange as part of a reorganization or that a U.S. court would uphold the status of such exchange as part of a reorganization in the event of an IRS challenge.

The foregoing is subject in its entirety to the discussion of certain of the material U.S. federal income tax consequences of the Arrangement applicable to U.S. Holders and Non-U.S. Holders, see “Income Tax Considerations – Certain United States Federal Income Tax Considerations”. Such summary is not intended to be legal, business or tax advice and CMMC Shareholders are urged to consult their own tax advisors as to the tax consequences of the Arrangement to them with respect to their particular circumstances.

 

Q.

Are there any risks I should consider in connection with the Arrangement?

 

A.

Yes. There are a number of risk factors relating to CMMC’s and Hudbay’s respective businesses and operations, the Arrangement and the Combined Company’s business and operations following completion of the Arrangement, all of which should be carefully considered by CMMC Shareholders in evaluating whether to approve the Arrangement Resolution. In addition to the risk factors described under the heading “Risks and Uncertainties” in the CMMC AIF and CMMC Q1 Interim MD&A and under the heading “Risk Factors” in the Hudbay AIF, which are specifically incorporated by reference into this Circular, see “Risk Factors” for a non-exhaustive list of certain additional and supplemental risk factors relating to the Arrangement and the business and operations of the Combined Company following completion of the Arrangement which CMMC Shareholders should carefully consider before voting on the Arrangement Resolution.

 

Q.

When will I receive the Consideration payable to me under the Arrangement for my CMMC Shares?

 

A.

You will receive the Consideration due to you under the Arrangement as soon as practicable after the Effective Date. In order for a Registered CMMC Shareholder (other than Dissenting Shareholders, if any) to receive the Consideration Shares they are entitled to receive pursuant to the Arrangement, such Registered CMMC Shareholder must deposit the certificate(s) or DRS Advice(s) representing his, her or its CMMC Shares with the Depositary (at the address specified on the last page of the Letter of Transmittal). The Letter of Transmittal, properly completed and duly executed, together with all other documents and instruments referred to in the Letter of Transmittal or as reasonably required by the Depositary, must accompany all certificate(s) or DRS Advice(s) for CMMC Shares deposited for payment pursuant to the Arrangement. The exchange of CMMC Shares for the Consideration Shares in respect of any Non-Registered CMMC Shareholder (other than a holder of CMMC CDIs) is expected to be made with the Non-Registered CMMC Shareholder’s Intermediary account through the procedures in place for such purposes between CDS or DTC and such Intermediary, as applicable, with no further action required by the Non-Registered CMMC Shareholder. To prevent a delay in receiving the Consideration due under the Arrangement, Registered CMMC Shareholders should consider re-registering their CMMC Shares with an Intermediary prior to the Effective Date. For each Registered CMMC Shareholder, accompanying this Circular is a Letter of Transmittal. The Letter of Transmittal will also be available under CMMC’s issuer profile on SEDAR at www.sedar.com.

 

- 28 -


Holders of CMMC CDIs will not be provided with, and will not need to submit, a Letter of Transmittal. At the Effective Time, CMMC CDI holders will cease to own CMMC CDIs and will receive the applicable Consideration for each CMMC CDI held. Holders of CMMC CDIs should contact Computershare Australia if they have any questions regarding this process.

 

Q.

Are CMMC Shareholders entitled to Dissent Rights?

 

A.

Yes. Under the Interim Order, Registered CMMC Shareholders entitled to vote at the CMMC Meeting are entitled to exercise Dissent Rights with respect to the Arrangement Resolution in the manner provided in Part 8, Division 2 of the BCBCA, as modified by the Plan of Arrangement and the Interim Order. Any Registered CMMC Shareholder who exercises Dissent Rights in compliance with Part 8, Division 2 of the BCBCA, as modified by the Plan of Arrangement and the Interim Order, will be entitled, in the event that the Arrangement becomes effective, to be paid by Hudbay the fair value of the CMMC Shares held by such Dissenting Shareholder determined as at the close of business (Vancouver time) on the day before the Arrangement Resolution is adopted.

Non-Registered CMMC Shareholders who wish to exercise Dissent Rights should be aware that they may only do so through the registered owner of such CMMC Shares. Accordingly, a Non- Registered CMMC Shareholder desiring to exercise Dissent Rights must either: (a) make arrangements for the CMMC Shares beneficially owned by that holder to be registered in the name of the CMMC Shareholder prior to the time the Notice of Dissent is required to be received by CMMC; or (b) make arrangements for the registered holder of such CMMC Shares to exercise Dissent Rights on behalf of the holder.

A CMMC Shareholder’s right to dissent is more particularly described in the Circular. A copy of the Interim Order and the text of Part 8, Division 2 of the BCBCA are set forth in Appendix C and Appendix M, respectively, to the Circular. It is recommended that any Registered CMMC Shareholder wishing to exercise Dissent Rights seek legal advice, as failure to strictly comply with the provisions of Part 8, Division 2 of the BCBCA, as modified by the Plan of Arrangement and the Interim Order, and to adhere to the procedures established therein, may result in the loss of all rights thereunder. See “Dissenting Shareholder Rights”.

Questions Relating to the CMMC Meeting

 

Q.

Why did I receive this Circular?

 

A.

You received this Circular because you and the other CMMC Shareholders and CMMC CDI holders will be asked at the CMMC Meeting to approve, by a special resolution, the Arrangement involving CMMC and Hudbay under Part 9, Division 5 of the BCBCA, pursuant to which Hudbay will acquire all of the issued and outstanding CMMC Shares (including CMMC CDIs) in exchange for Hudbay Shares.

 

Q.

How and when is the CMMC Meeting being held?

 

A.

The CMMC Meeting will be held in a virtual-only format, which will be conducted via live webcast available online using a virtual shareholder meeting platform at www.virtualshareholdermeeting.com/CMMC2023 on June 13, 2023 at 9:00 a.m. (Vancouver time), subject to any adjournment(s) or postponement(s) thereof.

 

Q.

How do I attend the CMMC Meeting?

 

A.

To attend and participate in the virtual CMMC Meeting, Registered CMMC Shareholders and duly appointed proxyholders will need to visit www.virtualshareholdermeeting.com/CMMC2023 and check-in using the 16-digit control number included on their form of proxy. The CMMC Meeting platform is fully supported across browsers and devices running the most updated version of applicable software plugins. You should ensure you have a strong, preferably high-speed, Internet connection wherever you intend to participate in the CMMC Meeting.

 

- 29 -


Non-Registered CMMC Shareholders must carefully follow the procedures set out in this Circular in order to vote and ask questions through the live webcast. Non-Registered CMMC Shareholders who have not been duly appointed as proxyholders may check-in using the 16-digit control number located on their voting instruction form and will be able to ask questions, but not vote, through the live webcast. Guests, including CMMC CDI holders, can log into the CMMC Meeting and listen to the live webcast but will not be entitled to vote or ask questions.

See “Information Concerning the CMMC Meeting – Virtual CMMC Meeting” for additional information on how to navigate the virtual meeting platform, including how to vote and ask question at, the CMMC Meeting.

CMMC Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

 

Q.

Am I entitled to vote?

 

A.

You are entitled to vote if you were a holder of CMMC Shares or CMMC CDIs as of the close of business (Vancouver time) on April 25, 2023, the CMMC Record Date. Each holder of CMMC Shares as of the CMMC Record Date is entitled to one vote per CMMC Share held on all matters to come before the CMMC Meeting.

 

Q.

What am I voting on?

 

A.

If you are a holder of CMMC Shares or CMMC CDIs, you will be voting on the Arrangement Resolution to approve a proposed plan of arrangement under the BCBCA involving, among other things, CMMC and Hudbay pursuant to which Hudbay will acquire all of the issued and outstanding CMMC Shares in exchange for the Consideration. If the Arrangement Resolution is not approved by the requisite vote of CMMC Shareholders at the CMMC Meeting, the Arrangement will not be completed.

 

Q.

What constitutes quorum for the CMMC Meeting?

 

A.

Under CMMC’s constating documents and the Interim Order, the quorum for the CMMC Meeting is two persons who are, or who represent by proxy, CMMC Shareholders who, in the aggregate, hold at least 5% of the issued CMMC Shares entitled to be voted at the CMMC Meeting.

 

Q.

How many CMMC Shares are entitled to be voted?

 

A.

As of the CMMC Record Date, there were 214,383,473 CMMC Shares outstanding. Each CMMC Shareholder as of the CMMC Record Date is entitled to one vote per CMMC Share held on all matters to come before the CMMC Meeting.

 

Q.

Does any CMMC Shareholder beneficially own 10% or more of the CMMC Shares?

 

A.

To the knowledge of the directors and executive officers of CMMC, there is no Person that beneficially owns, directly or indirectly, or exercises control or direction over, voting securities of CMMC carrying 10% or more of the voting rights attached to any class of voting securities of CMMC.

 

Q.

What if I acquire ownership of CMMC Shares after the CMMC Record Date?

 

A.

You will not be entitled to vote CMMC Shares or CMMC CDIs acquired after the CMMC Record Date on the Arrangement Resolution. Only Persons owning CMMC Shares or CMMC CDIs as of the CMMC Record Date are entitled to vote their CMMC Shares or CMMC CDIs on the Arrangement Resolution.

 

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Q.

What if amendments are made to these matters or if other business matters are brought before the CMMC Meeting?

 

A.

If you attend the CMMC Meeting and are eligible to vote, you may vote on the business matters as you choose.

If you have completed and returned a form of proxy, the Persons named in the form of proxy will have discretionary authority to vote on amendments or variations to the matters identified in the Notice of Special Meeting of Shareholders of CMMC or other matters that may properly come before the CMMC Meeting, or any adjournment or postponement thereof. At the date of this Circular, management of CMMC is not aware of any such amendments, variations or other matters expected to come before the CMMC Meeting. However, if any other matter properly comes before the CMMC Meeting, the accompanying applicable proxy will be voted on such matter in accordance with the best judgment of the Person voting the proxy, including with respect to any amendments or variations to the matters identified in this Circular.

 

Q.

Am I a Registered CMMC Shareholder?

 

A.

You are a Registered CMMC Shareholder if you have certificate(s) or DRS Advice(s) representing CMMC Shares issued in your name and appear as a registered CMMC Shareholder on the books of CMMC.

 

Q.

Am I a Non-Registered CMMC Shareholder (also commonly referred to as a beneficial shareholder)?

 

A.

You are a Non-Registered CMMC Shareholder if your CMMC Shares are registered in the name of an Intermediary. If you are not sure whether you are a Registered CMMC Shareholder or a Non-Registered CMMC Shareholder.

CMMC Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

 

Q.

How do I vote if I am a Registered CMMC Shareholder?

 

A.

As a Registered CMMC Shareholder, you may either vote by proxy or vote by using a touch-tone telephone by calling toll free in North America 1-800-474-7493 (English) or 1-800-474-7501 (French) or by the Internet at www.proxyvote.com. If voting by telephone or on the Internet, please follow the instructions carefully and ensure that you have your form of proxy in hand as you will be required to enter the 16-digit control number located on the form of proxy.

See “Information Concerning the CMMC Meeting” in this Circular.

 

Q.

How do I vote if I am a Non-Registered CMMC Shareholder (other than a CMMC CDI holder)?

 

A.

In Canada, brokers, banks, trust companies or other intermediaries or nominees are required to seek voting instructions from Non-Registered CMMC Shareholders in advance of CMMC Shareholder meetings. Each nominee has its own mailing procedures and provides its own return instructions to clients, which should be carefully followed by Non-Registered CMMC Shareholders in order to ensure that their CMMC Shares are voted at the CMMC Meeting. In some cases, the voting instruction form provided to Non-Registered CMMC Shareholders by their nominee is very similar, even identical, to the form of proxy provided to Registered CMMC Shareholders. However, its purpose is limited to instructing the registered CMMC Shareholder (the nominee) on how to vote on behalf of the Non-Registered CMMC Shareholder. Most brokers now delegate responsibility for obtaining voting instructions from clients to Broadridge. Broadridge typically prepares a machine-readable voting instruction form which is mailed to Non-Registered CMMC Shareholders with a request that Non-Registered CMMC Shareholders return the forms to Broadridge or follow specified telephone or Internet-based voting procedures.

 

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See “Information Concerning the CMMC Meeting” in this Circular.

 

Q.

How do I vote if I am both a Registered CMMC Shareholder and a Non-Registered CMMC Shareholder?

 

A.

Should you hold some shares as a Registered CMMC Shareholder and others as a Non-Registered CMMC Shareholder, you will have to use both voting methods described above to vote all of your CMMC Shares. If you are a CMMC CDI holder, you will have to direct the votes attaching to those CMMC CDIs using the method described immediately below.

 

Q.

How do I vote if I am a CMMC CDI holder?

 

A.

A CMMC CDI is a CHESS Depositary Interest representing an uncertificated unit of beneficial ownership of an underlying CMMC Share, which is registered in the name of CDN.

As the holders of CMMC CDIs are not the legal owners of the underlying CMMC Shares, CDN is entitled to vote at the CMMC Meeting at the instruction of the holders of the CMMC CDIs. As a result, holders of CMMC CDIs can expect to receive a CDI VIF, together with the other CMMC Meeting Materials from Computershare Australia. These CDI VIFs are to be completed and returned to Computershare Australia in accordance with the instructions contained therein. CDN is required to follow the voting instructions properly received from holders of CMMC CDIs.

If you hold your interest in CMMC CDIs through an Intermediary, you will need to follow the instructions of your Intermediary.

 

Q.

Who is soliciting my proxy?

 

A.

The management of CMMC is soliciting your proxy.

The solicitation of proxies is intended to be primarily by mail but may also be made by telephone, e-mail, Internet, fax transmission or other electronic means of communication or in person by the directors, officers, employees and representatives of CMMC. The total cost of soliciting proxies and mailing the materials in connection with the CMMC Meeting will be borne by CMMC. In addition, CMMC has retained Kingsdale Advisors to assist it in connection with communicating to CMMC Shareholders in respect of the Arrangement.

 

Q.

Who votes my CMMC Shares and how will they be voted if I return a form of proxy?

 

A.

The accompanying form of proxy, when properly signed, confers authority on the Persons named in it as proxies with respect to any amendments or variations to the matters identified in the Notice of Special Meeting of Shareholders of CMMC or other matters that may properly come before the CMMC Meeting, or any adjournment or postponement thereof. Notwithstanding the foregoing, the Persons named in the accompanying form of proxy will vote or withhold from voting the CMMC Shares in respect of which they are appointed in accordance with the direction of the CMMC Shareholder appointing them and if the CMMC Shareholder specifies a choice with respect to any matter to be voted upon, such CMMC Shareholders’ CMMC Shares will be voted accordingly. CMMC’s named proxyholders are Gilmour Clausen, President and Chief Executive Officer of CMMC or, failing him, Letitia Wong, Chief Financial Officer of CMMC.

If you sign and return your form of proxy without designating a proxyholder and do not give voting instructions or specify that you want your CMMC Shares withheld from voting, the CMMC representatives named in the form of proxy will vote your CMMC Shares FOR the Arrangement Resolution.

 

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IN THE ABSENCE OF ANY SUCH INSTRUCTION, CMMC SHARES REPRESENTED BY PROXIES RECEIVED BY MANAGEMENT WILL BE VOTED FOR THE ARRANGEMENT RESOLUTION.

 

Q.

Can I appoint someone other than those named in the enclosed form of proxy to vote my CMMC Shares?

 

A.

Yes, you have the right to appoint another Person of your choice. A CMMC Shareholder that wishes to appoint another Person or entity (who need not be a CMMC Shareholder) to represent such CMMC Shareholder at the CMMC Meeting may either insert the Person or entity’s name in the blank space provided in the form of proxy or complete another proper form of proxy, submit the form of proxy and register such proxyholder with Broadridge after submitting the form of proxy.

See “Information Concerning the CMMC Meeting – Appointment and Revocation of Proxies” in this Circular.

 

Q.

What if my CMMC Shares are registered in more than one name or in the name of a company?

 

A.

If your CMMC Shares are registered in more than one name, all registered Persons must sign the form of proxy. If your CMMC Shares are registered in a company’s name or any name other than your own, you may be required to provide documents proving your authorization to sign the form of proxy for that company or name.

CMMC Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

 

Q.

Can I revoke a proxy or voting instruction?

 

A.

If you are a Registered CMMC Shareholder, you can change or revoke a previously delivered vote by: (a) voting again on the Internet or by telephone, or completing a new form of proxy that is dated later than the form of proxy previously submitted and depositing it with Broadridge in accordance with the instructions set out above no later than 9:00 a.m. (Vancouver time) on June 9, 2023, or, if the CMMC Meeting is adjourned or postponed, no later than 48 hours (excluding weekends and statutory holidays in the Province of British Columbia) before the CMMC Meeting is reconvened; (b) depositing a written statement with Broadridge (executed by you or a person authorized to sign on your behalf) in accordance with the instructions set out above no later than 9:00 a.m. (Vancouver time) on June 9, 2023, or, if the CMMC Meeting is adjourned or postponed, no later than 48 hours (excluding weekends and statutory holidays in British Columbia) before the CMMC Meeting is reconvened; or (c) any other manner permitted by law.

If you vote on a ballot at the CMMC Meeting you will be revoking any and all previously submitted proxies. If you DO NOT wish to revoke your previously submitted proxies, do not vote at the CMMC Meeting.

Only Registered CMMC Shareholders have the right to directly revoke a proxy. Non-Registered CMMC Shareholders (other than CMMC CDI holders) that wish to change their vote must arrange for their respective Intermediaries to revoke the proxy on their behalf in accordance with any requirements of the Intermediaries. Holders of CMMC CDIs that wish to change their vote must do so prior to the CDI VIF deadline.

See “Information Concerning the CMMC Meeting – Appointment and Revocation of Proxies” in this Circular.

 

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Q.

Are Hudbay Shareholders required to approve the Arrangement?

 

A.

Yes. Completion of the Arrangement is also conditional upon approval by Hudbay Shareholders of the Hudbay Resolution at the Hudbay Meeting which is scheduled to be held at 10:30 a.m. (Toronto time) on June 13, 2023.

In order to become effective, the Hudbay Resolution must be approved by at least a simple majority of the votes cast by Hudbay Shareholders present virtually or represented by proxy at the Hudbay Meeting. If the Hudbay Resolution is not approved by the requisite vote of the Hudbay Shareholders at the Hudbay Meeting, the Arrangement will not be completed. Hudbay Shareholders will not be asked to vote on any of the matters to be considered and voted upon at the CMMC Meeting.

 

Q.

Should I send in my proxy now?

 

A.

Yes. Once you have carefully read and considered the information in this Circular, you should complete and submit the enclosed voting instruction form or form of proxy. You are encouraged to vote well in advance of the proxy cut-off time at 9:00 a.m. (Vancouver time) on June 9, 2023 to ensure your CMMC Shares are voted at the CMMC Meeting. If the CMMC Meeting is adjourned or postponed, your proxy must be received not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time of the adjourned or postponed CMMC Meeting. The time limit for deposit of proxies may be waived or extended by the chair of the CMMC Meeting at his or her discretion, with or without notice. The chair is under no obligation to accept or reject any particular late proxy.

 

Q.

Who is responsible for counting and tabulating the votes by proxy?

 

A.

Votes by proxy are counted and tabulated by Broadridge.

 

Q.

What if I have other questions?

 

A.

If you have any questions about this Circular or the matters described in this Circular, please contact your professional advisor. If you would like additional copies, without charge, of this Circular, have any questions regarding the CMMC Meeting or require assistance with voting your proxy, please contact CMMC’s and Hudbay’s joint proxy solicitation agent, Kingsdale Advisors:

Hudbay Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-866-581-1571 (toll-free in North America) or 1-416-623-2514 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.HudbayPOA.com.

CMMC Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

 

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SUMMARY

The following is a summary of certain information contained or incorporated by reference in this Circular, including its Appendices. This summary is not intended to be complete and is qualified in its entirety by the more detailed information contained elsewhere in this Circular, the attached Appendices and in the documents incorporated by reference, all of which are important and should be reviewed carefully. Capitalized terms used in this summary without definition have the meanings ascribed to them in the “Glossary of Terms”. Shareholders are urged to read this Circular, the attached Appendices and the documents incorporated by reference carefully and in their entirety.

The Arrangement

On April 13, 2023, Hudbay and CMMC entered into the Arrangement Agreement pursuant to which Hudbay agreed to acquire all of the issued and outstanding CMMC Shares. The Arrangement will be effected by way of a court approved Plan of Arrangement under the BCBCA involving, among others, CMMC and Hudbay, pursuant to the terms of the Arrangement Agreement, the Interim Order and the Final Order. Subject to receipt of the CMMC Shareholder Approval, the Hudbay Shareholder Approval, the Final Order and the satisfaction or waiver of certain other conditions, Hudbay will acquire all of the issued and outstanding CMMC Shares on the Effective Date. The Parties intend to rely upon the Section 3(a)(10) Exemption with respect to the issuance of the Consideration Shares and the Hudbay Replacement Options pursuant to the Arrangement.

If completed, the Arrangement will result in Hudbay acquiring all of the issued and outstanding CMMC Shares on the Effective Date and CMMC will be an indirect wholly owned Subsidiary of Hudbay and Hudbay will continue the operations of Hudbay and CMMC on a combined basis. Pursuant to the Plan of Arrangement, CMMC Shareholders (other than Dissenting Shareholders) will receive 0.381 of a Hudbay Share for each CMMC Share or CMMC CDI held at the Effective Time.

Current Hudbay Shareholders and Former CMMC Shareholders are expected to own approximately 76% and 24% of the Hudbay Shares in the Combined Company, respectively, immediately following completion of the Arrangement (on a non diluted basis), in each case, based on the number of Hudbay Shares and CMMC Shares issued and outstanding as of April 12, 2023 (the business day immediately prior to the announcement of the Arrangement). See “The Arrangement” and “Information Concerning Hudbay Following the Arrangement”.

Background to the Arrangement

The Arrangement Agreement is the result of an arm’s length negotiation between Hudbay and CMMC and their respective legal and financial advisors. The background to the Arrangement is set forth in this Circular. See “The Arrangement – Background to the Arrangement”.

Recommendation of the Hudbay Board

The Hudbay Board, having undertaken a thorough review of, and having carefully considered the terms of the Arrangement and the Arrangement Agreement, and after consulting with its financial and legal advisors, including having received and taken into account the TD Securities Fairness Opinion and such other matters as it considered necessary and relevant, has unanimously determined that the Arrangement is in the best interests of Hudbay and has authorized Hudbay to enter into the Arrangement Agreement and all related agreements.

Accordingly, the Hudbay Board has unanimously approved the Arrangement and the entering into by Hudbay of the Arrangement Agreement and unanimously recommends that the Hudbay Shareholders vote FOR the Hudbay Resolution. See “The Arrangement – Recommendation of the Hudbay Board”.

 

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Recommendation of the CMMC Special Committee

The CMMC Special Committee, having undertaken a thorough review of, and having carefully considered the terms of the Arrangement and the Arrangement Agreement, and after consulting with its financial and legal advisors, including having received and taken into account the CMMC Fairness Opinions and such other matters as it considered necessary and relevant, unanimously determined that the Arrangement is in the best interests of CMMC and that the Arrangement is fair and reasonable to the CMMC Shareholders and has unanimously recommended to the CMMC Board that the CMMC Board approve the Arrangement and the entering into by CMMC of the Arrangement Agreement and recommend that the CMMC Shareholders vote FOR the Arrangement Resolution.

Recommendation of the CMMC Board

The CMMC Board, having undertaken a thorough review of, and having carefully considered the terms of the Arrangement and the Arrangement Agreement, and after consulting with its financial and legal advisors, including having received and taken into account the CMMC Fairness Opinions, the unanimous recommendation of the CMMC Special Committee and such other matters as it considered necessary and relevant, unanimously determined that the Arrangement is in the best interests of CMMC and that the Arrangement is fair and reasonable to the CMMC Shareholders.

Accordingly, the CMMC Board has unanimously approved the Arrangement and the entering into by CMMC of the Arrangement Agreement and unanimously recommends that the CMMC Shareholders vote FOR the Arrangement Resolution. See “The Arrangement – Recommendation of the CMMC Board”.

Reasons for the Arrangement

In making their respective recommendations, the Hudbay Board and the CMMC Board reviewed and considered a number of factors relating to the Arrangement, including those listed below, with the benefit of advice from their respective senior management teams and financial and legal advisors and, in the case of the CMMC Board, input from, and the unanimous recommendation of, the CMMC Special Committee. The following is a summary of the principal reasons for the respective recommendations of the Hudbay Board and the CMMC Board:

 

   

Creates a Leading Intermediate Copper-Focused Producer with Enhanced Scale. The Combined Company will have a larger-scale platform backed by three long-life operating mines with exploration and expansion upside, three large-scale development projects and one of the largest mineral resource bases among intermediate copper producers.

 

   

Increased Diversification in Tier-One Mining Jurisdictions. The Combined Company will have a geographically balanced portfolio in tier-one mining jurisdictions (Peru, Canada and the United States).

 

   

Access to Efficiencies and Synergies. The combination of Hudbay and CMMC creates a unique opportunity to apply Hudbay’s operating efficiency practices to the Copper Mountain Mine. The Combined Company is expected to generate an estimated $30 million per year of operating efficiencies and corporate synergies after three years.1

 

   

Provides the Financial Strength to Deleverage While Investing in Growth Projects. The Combined Company will be well-positioned for accelerated deleveraging in the near-term from increased diversification of cash flows and enhanced exposure to rising copper prices. The increased financial strength of the Combined Company is expected to provide enhanced financial flexibility to maximize value from a larger organic growth pipeline by

 

1 

Pre-tax annual synergies achieved over the course of three years.

 

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more efficiently allocating capital to projects that yield the highest risk-adjusted returns. The Combined Company’s greater cash flow generation and strong balance sheet also will enhance the Combined Company’s ability to advance brownfield expansion opportunities and prudently develop Hudbay’s Copper World project in Arizona, which is expected to deliver meaningful growth to the Combined Company.

 

   

Valuation Re-rating Potential. The strategic and financial benefits from the Arrangement are expected to position the Combined Company for a valuation re-rating.

 

   

Enhanced Leadership Team and Board of Directors. The Combined Company will be comprised of an experienced senior executive team that has a wealth of industry knowledge and complementary expertise in developing and operating open pit and underground copper mines. Following closing of the Arrangement, the Hudbay Board will include two directors from the CMMC Board, and the management team of Hudbay is expected to include select members from the management team of CMMC.

 

   

Comprehensive Arm’s Length Negotiations. The terms of the Arrangement Agreement and the Arrangement are the result of a comprehensive negotiation process, undertaken with the oversight and participation of Hudbay’s and CMMC’s respective financial and legal advisors.

 

   

Shareholder and Court Approval. The Arrangement is subject to the following shareholder and court approvals, which protect Hudbay Shareholders and CMMC Shareholders, and confirms that that Arrangement treats all stakeholders of Hudbay and CMMC equitably and fairly:

 

   

The Arrangement Resolution must be approved by (a) at least two-thirds of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, and (b) a simple majority of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, excluding the votes required to be excluded by MI 61-101, as described under “Securities Law Matters – Interests of Certain Persons in the Arrangement Multilateral Instrument 61-101”.

 

   

The Hudbay Resolution must be approved by at least a simple majority of the votes cast by Hudbay Shareholders present virtually or represented by proxy at the Hudbay Meeting.

 

   

The Arrangement is subject to a determination of the Court that the terms and conditions of the Arrangement are fair and reasonable, both procedurally and substantively, to the rights and interests of CMMC Shareholders and other affected persons.

 

   

Competition Act Approval. The likelihood being very high that the transaction would receive the Competition Act Approval under applicable Laws (such Competition Act Approval was received on May 8, 2023 as expected), and the fact that no other regulatory approvals are required.

 

   

Ability to Close. Each of Hudbay and CMMC is committed to completing the Arrangement and anticipates that the Parties will be able to complete the Arrangement, which is subject only to typical closing conditions for a transaction of this nature, within a reasonable time and in any event prior to the Outside Date.

 

   

Superior Proposals. The Arrangement Agreement permits the Hudbay Board and the CMMC Board, in the exercise of their respective fiduciary duties, to respond, prior to the Hudbay Meeting and the CMMC Meeting, respectively, to certain unsolicited Acquisition Proposals that are or could reasonably be expected to be more favourable, from a financial point of view, to Hudbay Shareholders or CMMC Shareholders, as the case may be, than the Arrangement.

 

- 37 -


   

Support of Directors and Senior Officers. Directors and certain senior officers of Hudbay and CMMC have entered into the Hudbay Support and Voting Agreements and the CMMC Support and Voting Agreements, respectively, pursuant to which they have agreed, among other things and subject to the terms and conditions of thereof, to vote their Hudbay Shares in favour of the Hudbay Resolution and to vote their CMMC Shares in favour of the Arrangement Resolution, as applicable.

See “Information Concerning Hudbay Following the Arrangement” for further information concerning Hudbay following completion of the Arrangement.

Additional Hudbay Reasons

In addition to the factors listed above in “Reasons for the Arrangement”, the Hudbay Board also considered and relied upon the following factors in making its unanimous recommendation to Hudbay Shareholders to vote FOR the Hudbay Resolution:

 

   

Participation in Future Growth. Hudbay Shareholders will participate in future increases in the value of the Combined Company and the opportunities associated with the Combined Company’s assets and properties. Following completion of the Arrangement, Current Hudbay Shareholders are expected to own approximately 76% of the Hudbay Shares in the Combined Company (on a non-diluted basis) based on the number of Hudbay Shares and CMMC Shares issued and outstanding as of April 12, 2023 (the business day immediately prior to the announcement of the Arrangement).

 

   

TD Securities Fairness Opinion. The TD Securities Fairness Opinion provided to the Hudbay Board to the effect that, as of April 12, 2023 and based upon the assumptions, limitations and qualifications set out therein, the Consideration to be paid by Hudbay to the CMMC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to Hudbay.

 

   

Advice from Citi. Hudbay engaged Citi to provide financial advice in connection with the Arrangement and the Hudbay Board relied on such advice in its assessment of the Arrangement.

 

   

Review by Hudbay Board. The terms of the Arrangement are the result of a comprehensive due diligence and negotiation process, undertaken with the oversight and participation of Hudbay’s legal counsel, and in the judgment of the Hudbay Board relying on financial, legal and other advisors and discussions with management and their review of the TD Securities Fairness Opinion, the Exchange Ratio and the Consideration to be paid to the CMMC Shareholders is fair from a financial point of view to Hudbay.

 

   

Other Factors. The Hudbay Board considered the Arrangement and Hudbay’s competitive position within the industry against the standalone Hudbay portfolio and with reference to other alternatives.

In making its determinations and recommendations with respect to the Arrangement, the Hudbay Board also considered a number of potential risks and potential negative factors, which the Hudbay Board concluded were outweighed by the positive substantive and procedural factors of the Arrangement described above, including the following:

 

   

the risks to Hudbay if the Arrangement is not completed, including the costs to Hudbay in pursuing the Arrangement, the significant attention required of management to implement the Arrangement, restrictions on the conduct of Hudbay’s business prior to completion of the Arrangement, and the potential impact on Hudbay’s current business operations and relationships (including with current and prospective employees, customers, distributors, suppliers and partners);

 

- 38 -


   

conditions to CMMC’s obligation to complete the Arrangement and the right of CMMC to terminate the Arrangement Agreement under certain circumstances;

 

   

the limitations contained in the Arrangement Agreement on Hudbay’s ability to solicit interest from third parties and the fact that if the Arrangement Agreement is terminated under certain circumstances, Hudbay must pay the Hudbay Termination Payment to CMMC; and

 

   

the change of control entitlements of CMMC Executives, as discussed in “Securities Law Matters—Interests of Certain Persons in the Arrangement – Termination and Change of Control Payments”.

The foregoing summary of the information and factors considered by the Hudbay Board is not intended to be exhaustive but includes the material information and factors considered by the Hudbay Board in its consideration of the Arrangement. Due to the wide variety of factors and information considered in connection with its evaluation of the Arrangement, the Hudbay Board did not find it practicable to, and therefore did not, quantify or otherwise attempt to assign any relative weight to each specific factor or item of information considered in reaching its conclusions and recommendation. In addition, individual members of the Hudbay Board may have given different weight to various factors or items of information.

The Hudbay Board’s reasons for recommending the Arrangement include certain assumptions relating to forward-looking information, and such information and assumptions are subject to various risks. See “Joint Management Information Circular – Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors”.

Additional CMMC Reasons

In addition to the factors listed above in “Reasons for the Arrangement”, the CMMC Board also considered and relied upon the following factors in making its unanimous recommendation to CMMC Shareholders to vote FOR the Arrangement Resolution:

 

   

Participation in a Leading Intermediate Copper Producer. Following completion of the Arrangement, CMMC Shareholders will own approximately 24% of the Combined Company (on a non-diluted basis) based on the number of Hudbay Shares and CMMC Shares issued and outstanding as of April 12, 2023 (the business day immediately prior to the announcement of the Arrangement). This provides CMMC Shareholders with meaningful ownership in the Combined Company that will, on completion of the Arrangement, be the third largest copper producer in Canada. This will provide CMMC Shareholders with the opportunity to participate in future increases in the value of the Combined Company and the opportunities and synergies associated with the Combined Company’s assets and properties. The meaningful ownership interest in the Combined Company is expected to provide a number of strategic benefits to CMMC Shareholders as compared to CMMC as a standalone entity:

 

   

Increased scale and enhanced portfolio. With three long-life operating mines with exploration and expansion upside, three large-scale development projects and one of the largest mineral resource bases among intermediate copper producers, the Combined Company effectively addresses the risks associated with CMMC’s dependence on a single asset.

 

- 39 -


   

Exposure to a diversified asset base. In addition to Canada, through the Combined Company, CMMC Shareholders will also gain exposure to another top-tier mining jurisdiction in Peru, as well as a geographically balanced portfolio with approximately 55% of net asset value estimated to be from North American assets and 45% of net asset value estimated to be from South American assets (based on analyst consensus estimates).

 

   

Increased production at lower cost. The Combined Company has an expected 2023 copper production of more than 150,000 tonnes, which represents an increase of approximately 270% over CMMC’s 2023 expected copper production, and is further complemented by meaningful gold production. The Combined Company would also benefit from its expected position in the second quartile of the copper cost curve, 2 which represents a decrease of approximately 50% as compared to CMMC’s 2023 cash cost profile on a standalone basis.

 

   

Improved capital allocation profile for growth opportunities. The Combined Company’s greater cash flow generation and strong balance sheet will enable CMMC Shareholders to benefit from attractive risk-adjusted growth from brownfield expansions and greenfield growth opportunities within the enhanced combined portfolio.

 

   

Improved Trading Liquidity and Enhanced Capital Markets Profile. With a market capitalization of approximately C$2.4 billion (on a fully-diluted basis, based on the closing prices of Hudbay Shares and CMMC Shares on the TSX on April 12, 2023, the last trading day prior to the announcement of the Arrangement), the Combined Company will have a significantly greater market capitalization and greater trading liquidity than CMMC would on a stand-alone basis.

 

   

CMMC Shareholders Receive an Immediate Premium. The Consideration to be received by CMMC Shareholders represents a premium of approximately 23% based on the 10-day volume-weighted average price of the Hudbay Shares and CMMC Shares on the TSX on April 12, 2023, the last trading day prior to the announcement of the Arrangement.

 

   

CIBC Fairness Opinion. The CIBC Fairness Opinion provided to the CMMC Board, to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Consideration to be received by the CMMC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the CMMC Shareholders.

 

   

Origin Fairness Opinion. The Origin Fairness Opinion provided to the CMMC Special Committee and the CMMC Board, to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Consideration to be received by the CMMC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the CMMC Shareholders. None of the fees payable to Origin are contingent on completion of the Arrangement.

 

   

Role of Special Committee. The Arrangement was reviewed and evaluated by the CMMC Special Committee, comprised of members of the CMMC Board who are independent of Hudbay and of management of CMMC. In addition, the terms of the Arrangement are the result of a comprehensive negotiation process, undertaken with the participation of CMMC’s financial and legal advisors. After consulting with its financial and legal advisors, including having received and taken into account the CMMC Fairness Opinions and such other matters as it considered necessary and relevant, the CMMC Special Committee

 

2 

Based on Wood Mackenzie’s 2023 by-product C1 copper cost curve (Q4 2022 dataset).

 

- 40 -


 

unanimously determined that the Arrangement is in the best interests of CMMC and that the Arrangement is fair and reasonable to the CMMC Shareholders and has unanimously recommended to the CMMC Board that the CMMC Board approve the Arrangement and the entering into by CMMC of the Arrangement Agreement and recommend that the CMMC Shareholders vote in favour of the Arrangement Resolution.

 

   

Consideration of Strategic Alternatives. The CMMC Board has periodically reviewed a range of strategic alternatives for creating shareholder value and, in the ordinary course of business, has had regular engagement with several industry peers exploring potential opportunities, including considering other potential transactions. In 2022 and early 2023, CMMC provided due diligence access in connection with a potential change of control transaction to four prospective counterparties (excluding Hudbay), but either did not receive a formal proposal or did not receive a compelling offer, and determined with the benefit of input from the CMMC Special Committee and its financial and legal advisors that the Arrangement was in the best interests of CMMC and the CMMC Shareholders over the long term. See “The Arrangement – Background to the Arrangement”. The opportunity to combine CMMC with Hudbay to create a leading intermediate copper producer is compelling and is expected to provide various opportunities to create sustained, long-term value for CMMC Shareholders while maintaining significant exposure to copper.

 

   

Dissent Rights. Any registered CMMC Shareholders entitled to vote on the Arrangement may exercise Dissent Rights and is entitled to be paid fair value for its CMMC Shares as determined by a Court, subject to strict compliance with all requirements applicable to the exercise of Dissent Rights. See “Dissenting Shareholder Rights”.

 

   

Reciprocal terms of the Arrangement Agreement. Key terms of the Arrangement Agreement, including non-solicitation covenants, termination fee amounts and triggers, are reciprocal between CMMC and Hudbay.

 

   

Reasonable termination payment. The CMMC Board determined that the C$22 million CMMC Termination Payment, which is payable in certain circumstances described under “The Arrangement Agreement – Termination of the Arrangement Agreement”, is reasonable. In the view of the CMMC Board, the CMMC Termination Payment would not preclude a third party from potentially making a CMMC Superior Proposal.

 

   

Tax Deferred Roll-Over. The exchange of CMMC Shares for Hudbay Shares pursuant to the Arrangement will generally be a tax-deferred transaction for Canadian federal income tax purposes for CMMC Shareholders who are resident in Canada and who do not elect to report a capital gain or loss on their Canadian federal income tax return in respect of the Arrangement, subject to the assumptions, qualifications and discussion under the heading “Certain Canadian Federal Income Tax Considerations”. The exchange of CMMC Shares for Hudbay Shares pursuant to the Arrangement is also intended to be treated as part of a tax-deferred “reorganization” within the meaning of Section 368 of the U.S. Tax Code. If such exchange qualifies as part of a reorganization, gain or loss generally would not be recognized by U.S. Holders for U.S. federal income tax purposes on their receipt of Hudbay Shares in exchange for CMMC Shares pursuant to the Arrangement, subject to the assumptions, qualifications and discussion under the heading “Certain United States Federal Income Tax Considerations”.

 

   

Other Factors. The CMMC Board also considered the Arrangement with reference to the financial condition and results of operations of CMMC, as well as its prospects, strategic alternatives and competitive position, including the risks involved in achieving those prospects and pursuing those alternatives in light of current market conditions, CMMC’s financial position, and operational challenges that affected the Copper Mountain Mine in 2022. The CMMC Board also considered the financial condition and results of operations of Hudbay, as well as its growth prospects, including the risks involved in achieving those prospects in light of the recent period of political instability in Peru.

 

- 41 -


In making its determinations and recommendations with respect to the Arrangement, the CMMC Board also considered a number of potential risks and potential negative factors, which the CMMC Board concluded were outweighed by the positive substantive and procedural factors of the Arrangement described above, including the following:

 

   

the risks to CMMC if the Arrangement is not completed, including the costs to CMMC in pursuing the Arrangement, the significant attention required of management to implement the Arrangement, restrictions on the conduct of CMMC’s business prior to completion of the Arrangement, and the potential impact on CMMC’s current business operations and relationships (including with current and prospective employees, customers, distributors, suppliers and partners);

 

   

conditions to Hudbay’s obligation to complete the Arrangement and the right of Hudbay to terminate the Arrangement Agreement in certain circumstances; and

 

   

the limitations in the Arrangement Agreement on CMMC’s ability to solicit interest from third parties, as mitigated by the provisions in the Arrangement Agreement that allow CMMC to engage in discussions or negotiations regarding any unsolicited Acquisition Proposal received prior to the approval of the Arrangement Resolution by CMMC Shareholders that constitutes or could reasonably be expected to constitute or lead to a CMMC Superior Proposal.

The foregoing summary of the information and factors considered by the CMMC Board is not intended to be exhaustive but includes the material information and factors considered by the CMMC Board in its consideration of the Arrangement. Due to the wide variety of factors and information considered in connection with its evaluation of the Arrangement, the CMMC Board did not find it practicable to, and therefore did not, quantify or otherwise attempt to assign any relative weight to each specific factor or item of information considered in reaching its conclusions and recommendation. In addition, individual members of the CMMC Board may have given different weight to various factors or items of information.

The CMMC Board’s reasons for recommending the Arrangement include certain assumptions relating to forward-looking information, and such information and assumptions are subject to various risks. See “Joint Management Information CircularCautionary Statement Regarding Forward-Looking Statements” and “Risk Factors”.

CMMC Fairness Opinions

Origin Fairness Opinion

Origin Merchant Partners (“Origin”) was retained by the CMMC Special Committee to act as its independent financial advisor in connection with the Arrangement. The engagement includes providing the CMMC Special Committee with financial advisory services related to the Arrangement, including providing an opinion as to the fairness, from a financial point of view, of the Consideration to the CMMC Shareholders.

At a meeting of the CMMC Special Committee held on April 12, 2023, Origin orally delivered its opinion to the CMMC Special Committee and the CMMC Board, which was subsequently confirmed in writing, to the effect that, as at the date thereof and based upon the assumptions, limitations and qualifications set out therein, the Consideration to be received by CMMC Shareholders pursuant to the Arrangement Agreement is fair, from a financial point of view, to the CMMC Shareholders. The full text of the Origin Fairness Opinion, setting out, among other things, the scope of review, assumptions made, matters considered and limitations and qualifications on the review undertaken in connection with the Origin Fairness Opinion, is attached as Appendix H to this Circular. The summary of the Origin Fairness Opinion in this Circular is qualified in its entirety by reference to the full text of the opinion.

 

- 42 -


Pursuant to the terms of its engagement letter with Origin dated April 10, 2023, CMMC agreed to pay Origin a fixed engagement fee and a fixed fee for rendering the Origin Fairness Opinion (none of which are contingent upon the conclusions reached in the Origin Fairness Opinion or the completion of the Arrangement). CMMC has also agreed to reimburse Origin for its reasonable out-of-pocket expenses incurred in connection with its services and to indemnify Origin against certain liabilities that might arise out of its engagement. The payment of expenses is not dependent on the completion of the Arrangement.

CIBC Fairness Opinion

CIBC World Markets Inc. (“CIBC”) was retained by CMMC to act as its financial advisor in connection with the Arrangement. The engagement includes providing CMMC with financial advisory services related to the Arrangement, including providing an opinion as to the fairness of the Consideration to be received by CMMC Shareholders pursuant to the Arrangement Agreement, from a financial point of view, to CMMC Shareholders.

At a meeting of the CMMC Board held on April 12, 2023, CIBC orally delivered its opinion to the CMMC Special Committee and the CMMC Board, which was subsequently confirmed in writing to the CMMC Board, to the effect that, as at the date thereof and based upon the assumptions, limitations and qualifications set out therein, the Consideration to be received by CMMC Shareholders pursuant to the Arrangement Agreement is fair, from a financial point of view, to CMMC Shareholders. The full text of the CIBC Fairness Opinion, setting out, among other things, the scope of review, assumptions made, matters considered and limitations and qualifications on the review undertaken in connection with the CIBC Fairness Opinion, is attached as Appendix I to this Circular. The summary of the CIBC Fairness Opinion in this Circular is qualified in its entirety by reference to the full text of the opinion.

Pursuant to the terms of its engagement letter with CIBC dated effective September 14, 2022, CMMC agreed to pay CIBC a fixed fee upon CMMC entering into the Arrangement Agreement, a fixed fee for rendering the CIBC Fairness Opinion (which is not contingent on the conclusions reached in the CIBC Fairness Opinion or the completion of the Arrangement), and an additional fee that is contingent on completion of the Arrangement. CMMC has also agreed to reimburse CIBC for its reasonable out-of-pocket expenses incurred in connection with its services and to indemnify CIBC against certain liabilities that might arise out of its engagement. The payment of expenses is not dependent on the completion of the Arrangement.

The CMMC Fairness Opinions are not recommendations to any CMMC Shareholder as to how to vote or act on any matter relating to the Arrangement or a recommendation to the CMMC Board or the CMMC Special Committee, as applicable, to enter into the Arrangement Agreement. The CMMC Fairness Opinions do not address any other aspect of the Arrangement and no opinion or view was expressed as to the relative merits of the Arrangement in comparison to other strategies or transactions that might be available to CMMC or in which CMMC might engage or as to the underlying business decision of CMMC to proceed with or effect the Arrangement.

The Origin Fairness Opinion is only one factor that was taken into consideration by the CMMC Special Committee in making its unanimous recommendation to the CMMC Board that the CMMC Board determine that the Arrangement is in the best interest of CMMC and that the Consideration is fair to the CMMC Shareholders, that the CMMC Board authorize CMMC to enter into the Arrangement Agreement and all related agreements and recommend that CMMC Shareholders vote in favour of the Arrangement Resolution.

The CIBC Fairness Opinion is only one factor that was taken into consideration by the CMMC Board in approving the terms of the Arrangement Agreement and all related agreements and making its unanimous determination that the Arrangement is in the best interests of CMMC and that the Consideration is fair to the CMMC Shareholders and to recommend that the CMMC Shareholders vote in favour of the Arrangement Resolution.

See “The Arrangement – Reasons for the Arrangement” and “The Arrangement – Additional CMMC Reasons”.

 

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The CMMC Board urges CMMC Shareholders to review the CMMC Fairness Opinions carefully and in their entirety.

See “The Arrangement – CMMC Fairness Opinions”, Appendix H and Appendix I of this Circular.

Hudbay Fairness Opinion

TD Securities Fairness Opinion

TD Securities was retained by Hudbay to provide financial advisory services related to the Arrangement. This included providing an opinion as to the fairness, from a financial point of view, to Hudbay, of the Consideration to be paid by Hudbay to the CMMC Shareholders pursuant to the Arrangement.

At a meeting of the Hudbay Board held on April 12, 2023, TD Securities orally delivered its opinion to the Hudbay Board, which was subsequently confirmed in writing, that, as at the date thereof and based upon the assumptions, limitations and qualifications set out therein, the Consideration to be paid pursuant to the Arrangement by Hudbay is fair, from a financial point of view, to Hudbay. The full text of the TD Securities Fairness Opinion, setting out, among other things, the scope of review, assumptions made, matters considered and limitations and qualifications on the review undertaken in connection with the TD Securities Fairness Opinion, is attached as Appendix J to this Circular. The summary of the TD Securities Fairness Opinion in this Circular is qualified in its entirety by reference to the full text of the opinion and Hudbay Shareholders are urged to read the TD Securities Fairness Opinion in its entirety.

Pursuant to the terms of its engagement letter with TD Securities, Hudbay agreed to pay TD Securities fees for its services, including a fixed fee upon notifying the Hudbay Board that it is prepared to deliver its preliminary indications of value presentation, a fixed fee for rendering the TD Securities Fairness Opinion (which is not contingent on the substance of or conclusions reached in the TD Securities Fairness Opinion or the completion of the Arrangement), and a fixed fee if TD Securities is required to provide a revised fairness opinion. Hudbay has also agreed to reimburse TD Securities for its reasonable out-of-pocket expenses incurred in connection with its services and to indemnify TD Securities against certain liabilities that might arise out of its engagement. The payment of expenses is not dependent on the completion of the Arrangement.

For more information, see the section below entitled “The Arrangement – Hudbay Fairness Opinion – TD Securities Fairness Opinion”.

The TD Securities Fairness Opinion is not a recommendation to any Hudbay Shareholder as to how to vote on the Hudbay Resolution or act on any matter relating to the Arrangement. The TD Securities Fairness Opinion does not address any other aspect of the Arrangement and no opinion or view was expressed as to the relative merits of the Arrangement in comparison to other strategies or transactions that might be available to Hudbay or in which Hudbay might engage or as to the underlying business decision of Hudbay to proceed with or effect the Arrangement. The TD Securities Fairness Opinion is only one factor that was taken into consideration by the Hudbay Board in approving the terms of the Arrangement Agreement and the Plan of Arrangement and making its unanimous determination that the Arrangement is in the best interests of Hudbay and to recommend that the Hudbay Shareholders vote in favour of the Hudbay Resolution. See “The Arrangement – Reasons for the Arrangement” and “The Arrangement – Additional Hudbay Reasons”. Neither TD Securities nor any of it affiliates is an insider, associate or affiliate (as such terms are defined in applicable Canadian Securities Laws) of Hudbay or CMMC or any of their respective associates or affiliates.

The Hudbay Board urges Hudbay Shareholders to review the TD Securities Fairness Opinion carefully and in its entirety. See Appendix J of this Circular.

 

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Support and Voting Agreements

CMMC has entered into Hudbay Support and Voting Agreements with the directors and senior officers of Hudbay, pursuant to which the Hudbay Supporting Shareholders have agreed, among other things and subject to the terms and conditions of the Hudbay Support and Voting Agreements, to vote their Hudbay Shares in favour of the Hudbay Resolution to approve the issuance of Hudbay Shares in connection with the Arrangement.

Hudbay has entered into CMMC Support and Voting Agreements with the directors and certain senior officers of CMMC, pursuant to which the CMMC Supporting Shareholders have agreed, among other things and subject to the terms and conditions of the CMMC Support and Voting Agreements, to vote their CMMC Shares in favour of the Arrangement Resolution to approve the Arrangement.

See “The Arrangement – Support and Voting Agreements”.

Procedure for the Arrangement to Become Effective

The Arrangement will be implemented by way of a court-approved plan of arrangement under Part 9, Division 5 of the BCBCA pursuant to the terms and subject to the conditions set out in the Arrangement Agreement and the Plan of Arrangement. The following procedural steps must be taken in order for the Arrangement to become effective:

 

   

the Hudbay Resolution must be approved by the Hudbay Shareholders at the Hudbay Meeting in accordance with Law;

 

   

the Arrangement Resolution must be approved by the CMMC Shareholders at the CMMC Meeting in the manner set forth in the Interim Order;

 

   

the Court must grant the Final Order approving the Arrangement; and

 

   

all conditions precedent to the Arrangement, as set forth in the Arrangement Agreement must be satisfied or waived by the appropriate Party.

There is no assurance that the conditions set out in the Arrangement Agreement will be satisfied or waived on a timely basis or at all. See “The Arrangement Agreement – Conditions to Closing”.

Treatment of CMMC Incentive Awards

All CMMC Incentive Awards, including all Hudbay Replacement Options, will ultimately be settled in cash or Hudbay Shares and cancelled as part of the Arrangement. Each CMMC Incentive Award will be treated on the same basis as other awards granted pursuant to the same incentive plan. The following is a description of the treatment of CMMC Incentive Awards outstanding immediately prior to the Effective Time (whether vested or unvested) in connection with the Arrangement.

Each CMMC Option outstanding immediately prior to the Effective Time will, without any further action by or on behalf of a holder, be exchanged for a Hudbay Replacement Option exercisable to purchase from Hudbay the number of Hudbay Shares equal to the product of (A) the number of CMMC Shares subject to the CMMC Option immediately before the Effective Time multiplied by (B) the Exchange Ratio (provided that if the foregoing would result in the issuance of a fraction of a Hudbay Share on any particular exercise of Hudbay Replacement Options, then the number of Hudbay Shares otherwise issued will be rounded down to the nearest whole number of Hudbay Shares). The exercise price per Hudbay Share subject to any such Hudbay Replacement Option will be an amount equal to the quotient of (X) the exercise price per CMMC Share underlying the exchanged CMMC Option immediately prior to the Effective Time divided by (Y) the Exchange Ratio (provided that the aggregate exercise price payable on any particular exercise of Hudbay Replacement Options will be rounded up to the nearest whole cent). It is intended that (a) the provisions of subsection 7(1.4) of the Tax Act apply to the aforesaid exchange of options and (b) such exchange of options be treated as other than the grant of a new stock right or a change in the form of

 

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payment pursuant to section 1.409A-1(b)(5)(v)(D) of the U.S. Treasury Regulations. Accordingly, and notwithstanding the foregoing, if required, the exercise price of a Hudbay Replacement Option will be adjusted such that the In-The-Money Value of the Hudbay Replacement Option immediately after the exchange does not exceed the In-The-Money Value of the CMMC Option for which it was exchanged immediately before the exchange. All terms and conditions of a Hudbay Replacement Option, including the term to expiry, conditions to and manner of exercising, will be the same as the CMMC Option for which it was exchanged, and will be governed by the terms of the applicable CMMC Option Plan and any document evidencing a CMMC Option will thereafter evidence and be deemed to evidence such Hudbay Replacement Option.

Following the exchange of CMMC Options for Hudbay Replacement Options, but also pursuant to the Plan of Arrangement, each Hudbay Replacement Option will be deemed to be fully vested and, without any further action by or on behalf of a holder of a Hudbay Replacement Option, the holder’s Hudbay Replacement Options will either: (a) if prior to the time of the step contemplated in this paragraph Hudbay has received notice of the exercise of the holder’s Hudbay Replacement Options and the holder has paid the required exercise price to Hudbay, be exercised and the holder will be entitled to receive the Hudbay Shares issuable pursuant to the exercise of such Hudbay Replacement Options; or (b) in any other case, be transferred and assigned by the holder, free and clear of any Liens, to Hudbay and the holder will be entitled to receive in exchange therefor a cash payment from Hudbay equal to (i) the aggregate Hudbay Replacement Option Value of the holder’s Hudbay Replacement Options, less (ii) the Applicable Withholdings (which Applicable Withholdings will be remitted to the applicable Governmental Entity on behalf of the holder); and the name of the holder will be removed from the register of options maintained by Hudbay, and each Hudbay Replacement Option will immediately be cancelled and all agreements relating to the Hudbay Replacement Options will be terminated and will be of no further force and effect.

Each CMMC RSU will be deemed to be fully vested on the Effective Date and will, without any further action by or on behalf of a holder, be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, and the holder thereof will be entitled to receive in exchange therefor and CMMC will issue in settlement of the holder’s CMMC RSUs that number of CMMC Shares to which the holder would otherwise be entitled to receive under the CMMC RSU Plan in respect of each CMMC RSU, whereupon the name of such CMMC RSU holder will be removed from the register of CMMC RSUs maintained by CMMC, and the CMMC RSU Plan, and each CMMC RSU will immediately be cancelled and all agreements relating to the CMMC RSUs will be terminated and will be of no further force and effect, and the holder will be and will be deemed to be the holder of that number of CMMC Shares so issued.

Each CMMC PSU will, without any further action by or on behalf of a holder, be deemed to be fully vested on the Effective Date and will be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, the Adjustment Factor or the Performance Multiplier, as applicable, will be deemed to be 100%, and the holder thereof will be entitled to receive in exchange therefor and CMMC will issue in settlement of the holder’s CMMC PSUs that number of CMMC Shares to which the holder would otherwise be entitled to receive under the CMMC PSU Plan in respect of each CMMC PSU, whereupon the name of such CMMC PSU holder will be removed from the register of CMMC PSUs maintained by CMMC, and the CMMC PSU Plan and the CMMC LTIP and each CMMC PSU will immediately be cancelled and all agreements relating to the CMMC PSUs will be terminated and will be of no further force and effect, and the holder will be and will be deemed to be the holder of that number of CMMC Shares so issued.

Each CMMC DSU will, without any further action by or on behalf of a holder, be deemed to be fully vested on the Effective Date and will be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, and the holder thereof will be entitled to receive in exchange therefor a cash payment from CMMC equal to (A) the aggregate CMMC DSU Value of the holder’s CMMC DSUs, less (B) the Applicable Withholdings (which Applicable Withholdings will be remitted to the applicable Governmental Entity on behalf of the holder), whereupon the name of such CMMC DSU holder will be removed from the register of CMMC DSUs maintained by CMMC, and the CMMC DSU Plan and each CMMC DSU will immediately be cancelled and all agreements relating to the CMMC DSUs will be terminated and will be of no further force and effect.

 

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Each CMMC Phantom Option will be deemed to be fully vested on the Effective Date and will, without any further action by or on behalf of a holder, be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, and the holder thereof will be entitled to receive in exchange therefor a cash payment from CMMC equal to (A) the aggregate CMMC Phantom Option Value of the holder’s CMMC Phantom Options, less (B) the Applicable Withholdings (which Applicable Withholdings will be remitted to the applicable Governmental Entity on behalf of the holder), whereupon the name of such CMMC Phantom Option holder will be removed from the register of CMMC Phantom Options maintained by Copper Mountain Mine (BC) Ltd., and each CMMC Phantom Option will immediately be cancelled and all agreements relating to the CMMC Phantom Options will be terminated and will be of no further force and effect.

Each CMMC Phantom RSU will be deemed to be fully vested on the Effective Date and will, without any further action by or on behalf of a holder, be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, and the holder thereof will be entitled to receive in exchange therefor a cash payment from CMMC, or a Subsidiary thereof, equal to (A) the aggregate CMMC Phantom RSU Value of the holder’s CMMC Phantom RSUs, less (B) the Applicable Withholdings (which Applicable Withholdings will be remitted to the applicable Governmental Entity on behalf of the holder), whereupon the name of such CMMC Phantom RSU holder will be removed from the register of CMMC Phantom RSUs maintained by Copper Mountain Mine (BC) Ltd., and the CMMC Phantom RSU Plan, and each CMMC Phantom RSU will immediately be cancelled and all agreements relating to the CMMC Phantom RSUs will be terminated and will be of no further force and effect.

See “The Arrangement – Arrangement Mechanics” and “Appendix E – Plan of Arrangement”.

Effective Date of the Arrangement

If the Hudbay Shareholder Approval and the CMMC Shareholder Approval are obtained, the Final Order is obtained approving the Arrangement and all other conditions to the Arrangement Agreement are satisfied or waived, the Arrangement will become effective at 12:01 a.m. (Vancouver time) , or other such time as CMMC and Hudbay may agree in writing and prior to the Effective Time, on the Effective Date. It is currently expected that the Effective Date will occur late in June 2023.

See “The Arrangement – Timing for Completion of the Arrangement”.

Procedure for Exchange of CMMC Shares for Hudbay Shares and Letter of Transmittal

For each Registered CMMC Shareholder, accompanying this Circular is a Letter of Transmittal. CMMC has enclosed an envelope with the CMMC Meeting Materials in order to assist CMMC Shareholders with returning Letters of Transmittal and related documents to the Depositary. Holders of CMMC CDIs will not be provided with, and will not need to submit, a Letter of Transmittal. The Letter of Transmittal will also be available under CMMC’s issuer profile on SEDAR at www.sedar.com. Additional copies of the Letter of Transmittal will also be available by contacting Hudbay’s and CMMC’s joint proxy solicitation agent, Kingsdale Advisors.

Hudbay Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-866-581-1571 (toll-free in North America) or 1-416-623-2514 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.HudbayPOA.com.

CMMC Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

In order for a Registered CMMC Shareholder (other than Dissenting Shareholders) to receive the Consideration Shares they are entitled to receive pursuant to the Arrangement, such Registered CMMC Shareholder must deposit the certificate(s) or DRS Advice(s) representing his, her or its CMMC Shares with the Depositary (at the address specified on the last page of the Letter of Transmittal). The Letter of Transmittal, properly completed and duly executed, together with all other documents and instruments referred to in the Letter of Transmittal or as reasonably required by the Depositary, must accompany all certificate(s) or DRS Advice(s) for CMMC Shares deposited for payment pursuant to the Arrangement.

 

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Only Registered CMMC Shareholders are required to submit a Letter of Transmittal. The exchange of CMMC Shares for the Consideration Shares in respect of any Non-Registered CMMC Shareholder (other than a holder of CMMC CDIs) is expected to be made with the Non-Registered CMMC Shareholder’s Intermediary account through the procedures in place for such purposes between CDS or DTC and such Intermediary, as applicable, with no further action required by the Non-Registered CMMC Shareholder. Any Non-Registered CMMC Shareholder whose CMMC Shares are registered in the name of an Intermediary should contact that Intermediary if they have any questions regarding this process and to arrange for such Intermediary to complete the necessary steps to ensure that they receive the Consideration in respect of their CMMC Shares.

See “The Arrangement – Procedure for Exchange of CMMC Shares for Hudbay Shares and Letter of Transmittal”.

Procedure for Exchange of CMMC CDIs for Hudbay Shares

Holders of CMMC CDIs are entitled to participate in the Plan of Arrangement. If the Arrangement Resolution is approved and implemented, holders of CMMC CDIs will receive Consideration Shares pursuant to the Plan of Arrangement, regardless of whether or not such holder provided an instruction to vote for or against the Arrangement. Following the Arrangement, the Hudbay Shares will not be listed on the ASX.

Holders of CMMC CDIs will not be provided with, and will not need to submit, a Letter of Transmittal. Pursuant to the Plan of Arrangement, CMMC CDI holders will cease to own CMMC CDIs and will receive in a book-based form the applicable Consideration Shares for each CMMC CDI held with a DRS Advice sent to their registered address. Holders of CMMC CDIs should contact Computershare Australia or Kingsdale Advisors if they have any questions regarding this process.

CMMC CDI Holders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

Extinction of Rights

Any certificate or DRS Advice which immediately prior to the Effective Time represented outstanding CMMC Shares that were exchanged pursuant to the Plan of Arrangement that is not deposited with all other instruments required by the Plan of Arrangement on or prior to the sixth anniversary of the Effective Date shall cease to represent a claim or interest of any kind or nature as a securityholder of CMMC or Hudbay. On such date, the Consideration Shares, as applicable, to which the former holder of the certificate or DRS Advice referred to in the preceding sentence was ultimately entitled shall be deemed to have been surrendered for no consideration to Hudbay. None of Hudbay, CMMC or the Depositary shall be liable to any person in respect of any Consideration Shares (or dividends, distributions and interest in respect thereof) delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

Accordingly, former CMMC Shareholders who deposit with the Depositary any certificate(s) or DRS Advice(s) representing the CMMC Shares held by such CMMC Shareholder after the sixth anniversary of the Effective Date will not receive the Consideration or any other consideration in exchange therefor and will not own any interest in CMMC, Hudbay or the Combined Company and will not be paid any compensation.

See “The Arrangement – Extinction of Rights”.

 

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No Fractional Shares

No fractional Hudbay Shares will be issued to CMMC Shareholders (including holders of CMMC CDIs) under the Plan of Arrangement. The number of Hudbay Shares to be received by a CMMC Shareholder will be rounded up to the nearest whole Hudbay Share in the event that a CMMC Shareholder is entitled to a fractional share representing 0.5 or more of a Hudbay Share and will be rounded down to the nearest whole Hudbay Share in the event that a CMMC Shareholder is entitled to a fractional share representing less than 0.5 of a Hudbay Share.

See “The Arrangement – No Fractional Shares”.

Shareholder Approvals

Hudbay Shareholder Approval

At the Hudbay Meeting, Hudbay Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, the Hudbay Resolution authorizing the issuance of Hudbay Shares in connection with the Arrangement, the full text of which is set out in Appendix A. The Hudbay Resolution is required pursuant to section 611 of the TSX Company Manual, as the number of Hudbay Shares to be issued to CMMC Shareholders pursuant to the Arrangement exceeds 25% of the number of Hudbay Shares issued and outstanding. In order to become effective, the Hudbay Resolution must be approved by at least a simple majority of the votes cast by Hudbay Shareholders present virtually or represented by proxy at the Hudbay Meeting.

CMMC Shareholder Approval

At the CMMC Meeting, CMMC Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, the Arrangement Resolution authorizing the Arrangement, the full text of which is set out in Appendix B. In order to become effective, the Arrangement Resolution must be approved by (a) at least two-thirds of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, and (b) a simple majority of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, excluding the votes required to be excluded by MI 61-101, as described under Securities Law MattersInterests of Certain Persons in the ArrangementMultilateral Instrument 61-101.

See “The Arrangement – Shareholder Approvals”.

Court Approval of the Arrangement

The Arrangement requires approval by the Court under Part 9, Division 5 of the BCBCA. Prior to mailing this Circular, CMMC (a) obtained the Interim Order providing for the calling and holding of the CMMC Meeting, the Dissent Rights and other procedural matters, and (b) filed the Notice of Hearing of Petition for the Final Order to approve the Arrangement. Copies of the Interim Order and the Notice of Hearing of Petition for the Final Order are attached as Appendix C and Appendix D, respectively, to this Circular.

The Court hearing in respect of the Final Order is expected to take place on or about June 15, 2023 at 9:45 a.m. (Vancouver time), or as soon reasonably practical thereafter and in the manner directed by the Court, at 800 Smithe Street, Vancouver, British Columbia, subject to receipt of the CMMC Shareholder Approval and the Hudbay Shareholder Approval.

At the Final Order hearing, the Court will consider, among other things, the fairness and reasonableness of the terms and conditions of the Arrangement and the rights and interests of every person affected. The Court may approve the Arrangement in any manner the Court may direct, subject to compliance with such terms and conditions, if any, as the Court deems fit. There can be no assurance that the Court will approve the Arrangement. Prior to the Final Order hearing, the Court will be informed that CMMC and Hudbay intend to rely on the exemption from the registration requirements under Section 3(a)(10) of the U.S. Securities Act for the issuance of Hudbay Shares issuable to CMMC Shareholders and CMMC CDI holders in exchange for their CMMC Shares and CMMC CDIs, respectively, and the issuance of Hudbay Replacement Options to holders of CMMC Options in exchange for their CMMC Options, pursuant to the Arrangement upon completion of the Arrangement.

 

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Under the terms of the Interim Order, any holder of CMMC Shares and any other interested person will have the right to appear at the hearing and make submissions at the Hearing of Petition for the Final Order subject to such party filing with the Court and serving upon CMMC and upon counsel to CMMC, in each case at the address set out below, a Response to Petition in the form required by the rules of the Court, and any additional affidavits or other materials on which a party intends to rely in connection with any submissions at such hearing, including such party’s address for service, as soon as reasonably practicable, and, in any event, not later than 4:00 p.m. (Vancouver time) on June 12, 2023. The Response to Petition and supporting materials must be delivered, within the time specified, to CMMC’s counsel at the following addresses: Farris LLP, 700 West Georgia Street, 25th Floor, Vancouver, British Columbia, V7Y 1B3, Attention: Tevia Jeffries and Davies Ward Phillips & Vineberg LLP, 155 Wellington Street West, 40th Floor, Toronto, ON, M5V 3J7, Attention: Derek Ricci. If the Final Order hearing is postponed, adjourned or rescheduled, then, subject to further direction of the Court, only those persons having previously served and filed a Response to Petition in compliance with the Final Order will be given notice of the new date.

See “The Arrangement – Court Approval of the Arrangement”.

Key Regulatory Matters

To the best of the knowledge of the Parties, other than those which have already been made or received, there are no filings, consents, waiting periods or approvals required to be made with, applicable to, or required to be received from any Governmental Entity prior to the Effective Date in connection with the Arrangement, except for the Court’s granting of the Final Order, which is a condition to the completion of the Arrangement. It is also a condition to the completion of the Arrangement that the TSX and the NYSE will have conditionally approved or authorized the listing of the Consideration Shares to be issued pursuant to the Arrangement, subject only to customary listing conditions. Hudbay has applied to list the Consideration Shares to be issued in connection with the Arrangement (including Hudbay Shares to be issued on the exercise of the Hudbay Replacement Options and the vesting of the certain other CMMC Incentive Awards following completion of the Arrangement) on the TSX and the NYSE and has received conditional approval for such listing from the TSX. Final approval of the TSX is conditional on the satisfaction by Hudbay of customary conditions to listing imposed by the TSX. Hudbay anticipates receiving all required authorizations from the NYSE prior to the closing of the Arrangement. See “The Arrangement – Stock Exchange Listing Approval and Delisting Matters”. If any additional filings or consents are required, such filings or consents will be sought but these additional requirements could delay the Effective Date or prevent the completion of the Arrangement.

See “The Arrangement – Key Regulatory Matters”.

Stock Exchange Listings Approval and Delisting Matters

Hudbay is a reporting issuer under Canadian Securities Laws in each of the provinces and territories of Canada and is a foreign private issuer under U.S. Securities Laws. The Hudbay Shares are listed and posted for trading on each of the TSX and the NYSE under the symbol “HBM”. CMMC is a reporting issuer under Canadian Securities Laws in each of the provinces of Canada, other than Quebec. The CMMC Shares are listed and posted for trading on the TSX under the symbol “CMMC”, and via CMMC CDIs on the ASX under the symbol “C6C”.

It is a mutual condition to the completion of the Arrangement that the TSX and the NYSE will have conditionally approved or authorized the listing of the Consideration Shares to be issued pursuant to the Arrangement, subject only to customary listing conditions. Hudbay has applied to list the Consideration Shares to be issued in connection with the Arrangement (including Hudbay Shares to be issued on the exercise of the Hudbay Replacement Options and the vesting of the certain other CMMC Incentive Awards following completion of the Arrangement) on the TSX and the NYSE and has received conditional approval for such listing from the TSX. Final approval of the TSX is conditional on the satisfaction by Hudbay of customary conditions to listing imposed by the TSX. Hudbay anticipates receiving all required authorizations from the NYSE prior to the closing of the Arrangement.

 

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Following completion of the Arrangement, the Hudbay Shares will continue to be listed and posted for trading on the TSX and the NYSE under the symbol “HBM”. Unlike the CMMC Shares, the Hudbay Shares are not, and after completion of the Arrangement will not be, listed on the ASX. It is expected that the CMMC Shares and CMMC CDIs, as applicable, will be de-listed from the TSX and the ASX after the Effective Date. Subject to applicable Laws, Hudbay will, as promptly as possible following completion of the Arrangement, apply to the applicable securities commissions or similar authorities in Canada to have CMMC cease to be a reporting issuer.

See “The Arrangement – Stock Exchange Listing Approval and Delisting Matters”.

Arrangement Agreement

The following is a summary of the material terms of the Arrangement Agreement and the Plan of Arrangement and is subject to, and qualified in its entirety by, the full text of the Arrangement Agreement, which have been filed under Hudbay’s and CMMC’s respective issuer profiles on SEDAR at www.sedar.com and under Hudbay’s profile on EDGAR at www.sec.gov, and by the Plan of Arrangement, which is attached to this Circular as Appendix E. Shareholders are urged to read the Arrangement Agreement and the Plan of Arrangement in their entirety.

Covenants, Representations and Warranties

The Arrangement Agreement contains usual and customary covenants and representations and warranties for an agreement of this type, which are summarized in the main body of this Circular.

See “The Arrangement Agreement – Covenants” and “The Arrangement Agreement – Representations and Warranties”.

Conditions to the Arrangement

The obligations of CMMC and Hudbay to complete the Arrangement are subject to the satisfaction or waiver of certain conditions set out in the Arrangement Agreement which are summarized in the main body of this Circular. These conditions include, among others, the receipt of the CMMC Shareholder Approval and the Hudbay Shareholder Approval, the listing of the Consideration Shares on the NYSE and TSX and Court approval.

See “The Arrangement Agreement – Conditions to Closing”.

Non-Solicitation Provisions

In the Arrangement Agreement, each of Hudbay and CMMC are subject to reciprocal “non-solicitation” restrictions. Subject to certain limitations, the board of directors of the Receiving Party may, following the expiration of a five business day match period to the other party (where the other party does not “match” the Superior Proposal pursuant to the provisions of the Arrangement Agreement), withdraw or change its recommendations in respect of the Arrangement in response to a Superior Proposal and/or may enter into a Proposed Agreement.

See “The Arrangement Agreement – Covenants – Covenants Regarding Non-Solicitation and Acquisition Proposals”.

 

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Termination of Arrangement Agreement

CMMC and Hudbay may mutually agree in writing to terminate the Arrangement Agreement and abandon the Arrangement at any time prior to the Effective Date. In addition, each of CMMC and Hudbay may terminate the Arrangement Agreement and abandon the Arrangement at any time prior to the Effective Date if certain specified events occur.

See “The Arrangement Agreement – Termination of the Arrangement Agreement”.

Termination Amounts and Expense Reimbursement

The Arrangement Agreement provides for termination payments of C$69 million and C$22 million for Hudbay and CMMC, respectively, payable by a party in certain circumstances if the Arrangement Agreement is terminated, as set out in the body of this Circular.

See “The Arrangement Agreement – Termination of the Arrangement Agreement – Termination Event and Termination Payment”.

Interests of Certain Persons in the Arrangement

The directors, officers and other related parties of Hudbay and CMMC may have interests in the Arrangement that are, or may be, different from, or in addition to, the interests of other Hudbay Shareholders and CMMC Shareholders and that may present them with actual or potential conflicts of interest in connection with the Arrangement. Other than the interests and benefits described under “Securities Law Matters – Interests of Certain Persons in the Arrangement”, none of the directors or officers of Hudbay and CMMC or, to the knowledge of the directors and officers of Hudbay and CMMC, any of their respective associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon in connection with the Arrangement or that would materially affect the Arrangement. The Hudbay Board and the CMMC Board were aware of these interests and considered them, among other matters, when recommending approval of the Arrangement by Hudbay Shareholders and CMMC Shareholders, respectively.

All of the benefits received, or to be received, by directors, officers or employees of Hudbay and CMMC, respectively, as a result of the Arrangement are, and will be, solely in connection with their services as directors, officers or employees of Hudbay and CMMC. No benefit has been, or will be, conferred for the purpose of increasing the value of consideration payable to any such Person for CMMC Shares held by such Persons and no consideration is, or will be, conditional on the Person supporting the Arrangement.

Information Concerning the Hudbay Meeting

The Hudbay Meeting will be held on June 13, 2023, subject to any adjournment or postponement thereof, in a virtual-only format via live webcast available online at https://web.lumiagm.com/265891707, using password hudbayspecial (case sensitive) at 10:30 a.m. (Toronto Time). As set out in the Notice of Special Meeting of Shareholders of Hudbay, at the Hudbay Meeting, Hudbay Shareholders will be asked to consider and vote on the Hudbay Resolution.

The Hudbay Board has fixed the close of business (Toronto time) on April 28, 2023 as the Hudbay Record Date for the determination of the Registered Hudbay Shareholders that will be entitled to notice of the Hudbay Meeting, and any adjournment or postponement thereof, and that will be entitled to vote at the Hudbay Meeting.

See “Information Concerning the Hudbay Meeting”.

 

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Information Concerning the CMMC Meeting

The CMMC Meeting will be held on June 13, 2023, subject to any adjournment or postponement thereof, in a virtual-only format via live webcast available online using the virtual shareholder meeting platform at www.virtualshareholdermeeting.com/CMMC2023 at 9:00 a.m. (Vancouver time). As set out in the Notice of Special Meeting of Shareholders of CMMC, CMMC Shareholders will be asked to consider and vote on the Arrangement Resolution.

The CMMC Board has fixed, and the Interim Order provides for, the close of business (Vancouver time) on April 25, 2023 as the CMMC Record Date for the determination of the Registered CMMC Shareholders that will be entitled to notice of the CMMC Meeting, and any adjournment or postponement thereof, and that will be entitled to vote at the CMMC Meeting.

See “Information Concerning the CMMC Meeting”.

Dissenting Shareholder Rights

Registered CMMC Shareholders who wish to dissent with respect to the Arrangement Resolution should take note that strict compliance with the dissent procedures is required.

The description of the rights of Dissenting Shareholders in this Circular is not a comprehensive statement of the procedures to be followed by a Dissenting Shareholder and is qualified in its entirety by reference to the full text of the Plan of Arrangement, a copy of which is attached to this Circular as Appendix E, the full text of the Interim Order, which is attached to this Circular as Appendix C, and the provisions of Part 8, Division 2 of the BCBCA, which is attached to this Circular as Appendix M.

Pursuant to the Interim Order, Dissenting Shareholders are entitled to be paid fair value for their CMMC Shares under the BCBCA, as modified or supplemented by the Interim Order, the Plan of Arrangement or any other order of the Court. A Dissenting Shareholder who intends to exercise Dissent Rights should carefully consider and comply with the provisions of Part 8, Division 2 of the BCBCA, as modified by the Interim Order, the Plan of Arrangement and any other order of the Court. The statutory provisions covering the right to exercise Dissent Rights are technical and complex. Failure to strictly comply with the requirements set forth in Part 8, Division 2 of the BCBCA (as modified or supplemented by the Interim Order, the Plan of Arrangement or any other order of the Court) may result in the loss of Dissent Rights. It is recommended that you seek independent legal advice if you wish to exercise Dissent Rights.

The Court hearing the application for the Final Order has the discretion to alter the Dissent Rights described herein based on the evidence presented at such hearing. Pursuant to the Interim Order, each Registered CMMC Shareholder is entitled, in addition to any other rights the holder may have, to exercise Dissent Rights and to be paid the fair value of the CMMC Shares held by the holder in respect of which the holder exercises Dissent Rights, determined, notwithstanding anything to the contrary contained in Part 8, Division 2 of the BCBCA, as of the close of business (Vancouver time) on the business day immediately preceding the date on which the Arrangement Resolution was adopted. Only registered CMMC Shareholders may exercise Dissent Rights.

If a CMMC Shareholder duly exercises its Dissent Rights in accordance with the BCBCA and the Plan of Arrangement and:

 

   

is ultimately determined to be entitled to be paid fair value for its CMMC Shares by Hudbay, such Dissenting Shareholder: (a) shall be entitled to be paid the fair value of such Dissent Shares by Hudbay, which fair value, notwithstanding anything to the contrary contained in the BCBCA, shall be the fair value of such Dissent Shares determined as of the close of business (Vancouver time) on the day immediately before the approval of the Arrangement Resolution; (b) shall be deemed not to have participated in the Arrangement; (c) shall be deemed to have transferred and assigned such CMMC Shares, free and clear of any Liens to Hudbay in accordance with Section 2.3(f) of the Plan of Arrangement; and (d) shall not be entitled to any other payment or consideration, including any payment that would be payable under the Arrangement had such holders not exercised their Dissent Rights in respect of such CMMC Shares; or

 

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ultimately is not entitled, for any reason, to be paid fair value for their CMMC Shares, such Dissenting Shareholder shall be deemed to have participated in the Arrangement, as of the Effective Time, on the same basis as a non-dissenting registered holder of CMMC Shares, and shall be entitled to receive only the Consideration pursuant to Section 2.3(g) of the Plan of Arrangement that such Dissenting Shareholder would have received pursuant to the Arrangement if such Dissenting Shareholder had not exercised Dissent Rights,

but in no case shall Hudbay, CMMC or any other person be required to recognize any holders of CMMC Shares who exercise Dissent Rights as holders of CMMC Shares after the time that is immediately prior to the Effective Time, and the names of the Dissenting Shareholders shall be deleted from the central securities register as holders of CMMC Shares.

A Dissenting Shareholder must dissent with respect to all CMMC Shares in which the holder owns a beneficial interest. A Dissenting Shareholder must send CMMC a Notice of Dissent, which notice must be received by CMMC at Suite 1700 – 700 West Pender Street Vancouver, British Columbia, Canada, V6C 1G8, Attention: Matt Langford, with a copy to CMMC’s counsel, Davies Ward Phillips & Vineberg LLP, Attention: Melanie Shishler and Richard Fridman, 155 Wellington Street West, Toronto, Ontario, M5V 3J7, not later than 4:00 p.m. (Vancouver time) on June 9, 2023 (or 4:00 p.m. (Vancouver time) on the day that is two business days immediately preceding the date that any adjourned or postponed CMMC Meeting is reconvened or held, as the case may be).

If, as of the Effective Date, the aggregate number of CMMC Shares in respect of which CMMC Shareholders have duly and validly exercised Dissent Rights, or have instituted proceedings to exercise Dissent Rights in connection with the Arrangement, exceeds 10% of the CMMC Shares then outstanding, Hudbay is entitled, in its discretion, not to complete the Arrangement.

See “Dissenting Shareholder Rights”.

Information Concerning Hudbay

Hudbay is a diversified mining company with long-life assets in North and South America. Hudbay’s Constancia operations in Cusco (Peru) produce copper with gold, silver and molybdenum by-products. Hudbay’s Snow Lake operations in Manitoba (Canada) produce gold with copper, zinc and silver by-products. Hudbay has an organic pipeline that includes the Copper World project in Arizona and the Mason project in Nevada (United States), and its growth strategy is focused on the exploration, development, operation, and optimization of properties already controlled, as well as other mineral assets Hudbay may acquire that fit its strategic criteria. Hudbay Shares trade on the TSX and the NYSE under the trading symbol “HBM”.

For further details concerning Hudbay, see “Information Concerning Hudbay” and “Appendix K – Information Concerning Hudbay”.

Information Concerning CMMC

CMMC is a Canadian copper metal mining company with operations in British Columbia, Canada. Its principal operating asset is the 75%-owned Copper Mountain Mine in southern British Columbia, a large open pit copper mine. The Copper Mountain Mine also produces gold and silver as by-product metals. The CMMC Shares trade on the TSX under the trading symbol “CMMC” and via CMMC CDIs on the ASX under the trading symbol “C6C”.

For further details regarding CMMC, see also “Information Concerning CMMC” and “Appendix L – Information Concerning CMMC”.

 

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Information Concerning Hudbay Following the Arrangement

General

The Arrangement will result in a strategic business combination of Hudbay and CMMC, pursuant to which Hudbay will acquire all of the issued and outstanding CMMC Shares in exchange for the issuance of Hudbay Shares. Pursuant to the Arrangement, CMMC Shareholders (other than Dissenting Shareholders) will exchange each CMMC Share for 0.381 of a Hudbay Share.

Current Hudbay Shareholders and Former CMMC Shareholders are expected to own approximately 76% and 24% of the Hudbay Shares in the Combined Company, respectively, immediately following completion of the Arrangement (on a non-diluted basis), in each case, based on the number of Hudbay Shares and CMMC Shares issued and outstanding as of April 12, 2023 (the business day immediately prior to the announcement of the Arrangement).

Description of the Business

The Combined Company will be a diversified mining company with long-life assets in North and South America. The Combined Company’s growth strategy is focused on the exploration, development, operation, and optimization of properties it is in control of, as well as other mineral assets that it may acquire that fit its strategic criteria.

Corporate Structure

Following completion of the Arrangement, Hudbay will continue to be a corporation existing under the CBCA and the Former CMMC Shareholders (other than Dissenting Shareholders) will be shareholders of the Combined Company. After the Effective Date, CMMC and its Subsidiaries will be direct or indirect wholly-owned Subsidiaries of the Combined Company.

Description of Capital Structure

Hudbay’s authorized capital consists of an unlimited number of Hudbay Shares and an unlimited number of preference shares (none of which were issued and outstanding as of May 12, 2023).

Following completion of the Arrangement, the authorized capital of the Combined Company and the rights and restrictions of the Hudbay Shares will remain unchanged. As of May 12, 2023, there were 262,053,610 Hudbay Shares issued and outstanding. Assuming the Arrangement is completed in accordance with the Plan of Arrangement, and assuming that the number of issued and outstanding CMMC Shares and Hudbay Shares does not change, it is expected that up to approximately 83,932,999 additional Hudbay Shares will be issued upon the exchange of the CMMC Shares, resulting in a total of approximately 345,986,609 Hudbay Shares issued and outstanding immediately upon completion of the Arrangement. All Hudbay Shares rank equally as to voting rights, participation in a distribution of assets on a liquidation, dissolution or winding-up and the entitlement to dividends.

Dividend Policy and Capital Allocation

Hudbay has agreed that until the Effective Time, Hudbay will generally set the record and payment dates for its semi-annual dividend payment in the ordinary course consistent with past practice. Following completion of the Arrangement, subject to market conditions and Hudbay Board approval, it is currently anticipated that Hudbay will maintain a semi-annual dividend payment on a per share basis equal to the current Hudbay dividend payment.

See “Information Concerning Hudbay Following the Arrangement – Dividend Policy and Capital Allocation”.

 

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Directors and Officers of the Combined Company

Following completion of the Arrangement, the Hudbay Board will consist of 12 directors, comprised of 10 directors from Hudbay and two directors from CMMC. Hudbay will extend offers of employment to two existing senior executives of CMMC to join its existing senior management team. The final composition of the Hudbay Board and the identity of the two senior executives of CMMC that will be extended offers of employment will be determined prior to the Effective Date.

Risk Factors

Hudbay Shareholders who vote in favour of the Hudbay Resolution and CMMC Shareholders who vote in favour of the Arrangement Resolution will be voting in favour of combining the businesses of Hudbay and CMMC, and, in the case of CMMC Shareholders, to invest in Hudbay Shares, and in the case of Hudbay Shareholders, to invest in the business of CMMC. There are certain risk factors associated with the Arrangement and the proposed combination of Hudbay and CMMC’s respective businesses that should be carefully considered by Hudbay Shareholders and CMMC Shareholders. Readers are cautioned that such risk factors are not exhaustive and additional risks and uncertainties, including those currently unknown or considered immaterial to Hudbay and CMMC, may also adversely affect Hudbay or CMMC prior to the Arrangement or their combined businesses following completion of the Arrangement. These risk factors should be considered in conjunction with the other information included in this Circular, including the documents incorporated by reference herein, and documents filed by Hudbay and CMMC pursuant to applicable Laws from time to time.

See “Risk Factors”, “Appendix K – Information Concerning Hudbay – Risk Factors” and “Appendix L – Information Concerning CMMC – Risk Factors”.

Certain Income Tax Consequences of the Arrangement

CMMC Shareholders and holders of CMMC CDIs should consult with and rely upon their own tax advisors about the federal, provincial, state, local and foreign tax consequences applicable to them in each relevant jurisdiction (including without limitation Canada, the United States and Australia) in connection with the Arrangement.

For a discussion of certain of the material Canadian federal income tax consequences of the Arrangement, see “Income Tax Considerations – Certain Canadian Federal Income Tax Considerations”. For a discussion of certain of the material United States federal income tax consequences of the Arrangement applicable to U.S. Holders and Non-U.S. Holders, see “Income Tax Considerations – Certain United States Federal Income Tax Considerations”. Such summaries are of a general nature only and are not intended to be, and should not be construed as, legal, business or tax advice to any particular CMMC Shareholder or holder of CMMC CDIs. Such summaries are not exhaustive of all possible Canadian federal income tax considerations or United States federal income tax considerations. CMMC Shareholders and holders of CMMC CDIs are urged to consult their own tax advisors as to the tax consequences of the Arrangement to them with respect to their particular circumstances.

This Circular does not contain a summary of the non-Canadian federal and non-U.S. federal income tax considerations of the Arrangement for Hudbay Shareholders or CMMC Shareholders who are subject to income tax outside of Canada or the United States. Such Persons should consult their own tax advisors with respect to the tax implications of the Arrangement, including any associated filing requirements in such jurisdictions.

 

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THE ARRANGEMENT

On April 13, 2023, Hudbay and CMMC entered into the Arrangement Agreement pursuant to which Hudbay agreed to acquire all of the issued and outstanding CMMC Shares. The Arrangement will be effected by way of a court-approved Plan of Arrangement under the BCBCA involving, among others, CMMC and the CMMC Shareholders, pursuant to the terms of the Arrangement Agreement, the Interim Order and the Final Order. Subject to receipt of the CMMC Shareholder Approval, the Hudbay Shareholder Approval, the Final Order and the satisfaction or waiver of certain other conditions, Hudbay will acquire all of the issued and outstanding CMMC Shares on the Effective Date. The Parties intend to rely upon the Section 3(a)(10) Exemption with respect to the issuance of the Consideration Shares and the Hudbay Replacement Options pursuant to the Arrangement.

If completed, the Arrangement will result in Hudbay acquiring all of the issued and outstanding CMMC Shares on the Effective Date, and CMMC will be an indirect wholly-owned Subsidiary of Hudbay and Hudbay will continue the operations of Hudbay and CMMC on a combined basis. Pursuant to the Plan of Arrangement, CMMC Shareholders (other than Dissenting Shareholders) will receive 0.381 of a Hudbay Share for each CMMC Share or CMMC CDI held at the Effective Time.

Current Hudbay Shareholders and Former CMMC Shareholders are expected to own approximately 76% and 24% of the Hudbay Shares in the Combined Company, respectively, immediately following completion of the Arrangement (on a non-diluted basis), in each case, based on the number of Hudbay Shares and CMMC Shares issued and outstanding as of April 12, 2023 (the business day immediately prior to the announcement of the Arrangement). For further information regarding Hudbay following completion of the Arrangement, see “Information Concerning Hudbay Following the Arrangement”.

Background to the Arrangement

The Arrangement Agreement is the result of arm’s length negotiations among representatives of CMMC and Hudbay and their respective legal and financial advisors. The following is a summary of the principal events, meetings, discussions and negotiations involving the Parties leading up to the execution of the Arrangement Agreement and public announcement of the Arrangement.

In addition to establishing CMMC’s business and operational objectives, the CMMC Board regularly reviews its overall corporate strategy and long-term strategic plan, with the goal of maximizing shareholder value. This process includes assessing the relative merits of CMMC’s stand-alone business plan, potential acquisitions, dispositions and various combinations involving CMMC or its assets, having regard to, among other things, the global copper markets, CMMC’s position as a pure-play copper producer in a tier-one mining jurisdiction, the upside potential associated with CMMC’s ongoing exploration activities, the potential opportunities and inherent risks of a company with a single producing asset and the financial condition of CMMC.

In order to facilitate this review, the CMMC Board periodically receives updates and presentations from management and external advisors regarding strategic alternatives. In accordance with its corporate governance guidelines, each meeting of the CMMC Board (and, following its formation, the CMMC Special Committee) is followed by an in camera session attended solely by directors without members of management present and a further in camera session attended solely by independent directors. In addition, in the ordinary course of business, CMMC has regular engagement with market participants, both strategic and financial, for the purpose of identifying opportunities for collaboration, joint ventures, asset acquisitions or dispositions and, in some cases, corporate-level transactions, all with a view to executing CMMC’s overall corporate strategy and long-term strategic plan and enhancing shareholder value. In appropriate circumstances, confidentiality agreements are executed by CMMC in order to facilitate strategic discussions and enable the exchange of non-public information.

 

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As part of this ongoing process of engagement, and consistent with Hudbay’s growth strategy pursuant to which Hudbay frequently evaluates potential acquisitions that meet its stringent strategic criteria, on December 22, 2021, CMMC and Hudbay entered into a mutual confidentiality agreement (the “2021 Confidentiality Agreement”) with a two-year term and a one-year standstill period. Throughout the first half of 2022, CMMC and Hudbay conducted reciprocal financial and technical due diligence, and representatives of CMMC and Hudbay held various high-level discussions regarding the potential benefits and strategic rationale of combining the two companies. During these discussions, specific financial terms were not discussed and neither CMMC nor Hudbay put forward any formal proposals.

In the summer of 2022, Hudbay senior management met to discuss a potential acquisition of CMMC, having regard for the strategic rationale for pursuing the acquisition of a producing asset that would increase the scale, resilience and diversity of Hudbay’s asset base and lead to enhanced shareholder value. Following a review of their preliminary due diligence findings, Hudbay’s senior management agreed to dedicate additional resources to the potential transaction. Hudbay subsequently completed site visits to the Copper Mountain Mine and the Eva Copper Project and engaged Citi as its financial advisor and Goodmans as its legal advisor.

During the period of its initial engagement with Hudbay, and continuing through the fall of 2022, CMMC initiated a process for the potential sale of its Eva Copper Project, and representatives of CMMC continued to engage in normal course discussions with other market participants regarding other potential strategic opportunities, including corporate-level transactions. Such discussions resulted in CMMC entering into a confidentiality agreement with both an intermediate gold company (“Party A”) and a development-stage base metals company (“Party B”). Intermittent dialogue and discussions between CMMC and these parties continued throughout 2022 and into 2023.

Hudbay senior management discussed the potential opportunity to acquire CMMC with Hudbay’s Board at a strategic planning meeting on August 8, 2022.

On August 15, 2022, Mr. Eugene Lei, then Senior Vice President, Corporate Development and Strategy (and currently Chief Financial Officer) of Hudbay and Ms. Letitia Wong, then Executive Vice President, Strategy and Corporate Development (and currently Chief Financial Officer) of CMMC, met to discuss initial due diligence findings and next steps. On August 19, 2022, Mr. Gilmour Clausen, President and Chief Executive Officer of CMMC, and Mr. Peter Kukielski, President and Chief Executive Officer of Hudbay, met to discuss a possible transaction and the strategic rationale of combining the two companies.

On August 24, 2022, Messrs. Kukielski, Clausen and Lei and Ms. Wong met to continue discussions regarding the strategic rationale for the potential combination of CMMC and Hudbay. At the meeting, Hudbay submitted a non-binding indicative proposal (the “Initial Hudbay Proposal”) that contemplated the acquisition of CMMC by Hudbay for all-share consideration at an exchange ratio that would represent a premium of between 15% and 20% based on the 20-day volume-weighted average price (“VWAP”) of each companies’ shares on the TSX at the time of announcement. The Initial Hudbay Proposal was conditional upon, among other things, the termination of the Eva Copper Project sale process and the temporary suspension of work on the Copper Mountain Mine expansion study and updated life of mine plan (the “2022 Updated Expansion Study”). In connection with the Initial Hudbay Proposal, Hudbay proposed exclusive negotiations with a view to announcing a transaction by September 30, 2022.

On August 31, 2022, Mr. Edward Dowling, the Chair of the CMMC Board, provided an update to the CMMC Board on the engagement with Hudbay and the Initial Hudbay Proposal, together with other key initiatives, including the status of the 2022 Updated Expansion Study.

On September 1, 2022, Mr. Clausen provided a further update to the CMMC Board on the Initial Hudbay Proposal, including senior management’s view that, while the potential benefits and strategic rationale for a combination of the two companies were worth exploring, the Initial Hudbay Proposal did not represent adequate value for CMMC. Following a review of the Initial Hudbay Proposal with CIBC, CMMC’s external financial advisor, and Davies, CMMC’s external legal counsel, the CMMC Board authorized senior management to continue discussions with Hudbay on a non-exclusive basis. In addition, senior management was directed to advise Hudbay that CMMC was not prepared to terminate the Eva Copper

 

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Project sale process or delay other initiatives, including the completion and public disclosure of the 2022 Updated Expansion Study, all of which the CMMC Board viewed as critical to understanding the value of CMMC and its assets, and necessary for an adequate assessment of any potential business combination transaction. Accordingly, on September 3, 2022, CMMC informed Hudbay that it was not prepared to proceed with a transaction on the terms set out in the Initial Hudbay Proposal, or to engage in further negotiations with respect to the financial terms of a potential transaction prior to the public disclosure of the 2022 Updated Expansion Study, but wished to maintain a dialogue on a non-exclusive basis regarding a potential combination.

Following that communication, the companies agreed to continue to advance reciprocal due diligence, including completing scheduled technical sessions and site visits in September and October 2022 (which included virtual management presentations from Hudbay on its Manitoba operations and Mason Copper Project and site visits to Hudbay’s Copper World Project completed by CMMC’s senior management and Mr. Dowling and a site visit to Hudbay’s Constancia Mine completed by CMMC’s senior management). By the fall of 2022, Hudbay had also substantially completed its technical due diligence of CMMC’s properties, including site visits to the Copper Mountain Mine and the Eva Copper Project.

On September 8, 2022, Messrs. Kukielski, Dowling, Clausen and Lei met to discuss in greater detail the potential benefits and strategic rationale for a combination of the two companies. Hudbay subsequently delivered a draft exclusivity agreement to CMMC for its consideration. On September 11, 2022, the CMMC Board met with members of senior management, CIBC and Davies in attendance. At the meeting, senior management and Mr. Dowling provided an update on CMMC’s site visit to the Copper World Project and its recent engagement with Hudbay and CIBC delivered a presentation regarding the potential transaction outlined in the Initial Hudbay Proposal. During the meeting, Davies was consulted to discuss the circumstances in which a special committee of the CMMC Board would be required or advisable and the fiduciary duties of directors in the context of potential change of control transactions and provided advice regarding the terms of the exclusivity agreement proposed by Hudbay. Given the preliminary stage of discussions with Hudbay, following discussion and the receipt of legal advice, the CMMC Board determined to defer consideration of a special committee to a date following its scheduled annual strategy meeting on September 22, 2022. The CMMC Board also re-affirmed its decision to continue discussions with Hudbay on a non-exclusive basis. Through September 2022 further discussions were held among the senior management teams of Hudbay and CMMC.

At CMMC’s regularly-scheduled annual strategy meeting of the CMMC Board and senior management held on September 22, 2022, CIBC provided a detailed presentation on the base metals sector landscape. In addition, the CMMC Board and senior management, with financial advice from CIBC, continued the discussion and evaluation of CMMC’s existing operating and business plans and the various strategic options available to CMMC, including consideration of whether initiating a formal strategic review process would be in the best interests of CMMC following the public disclosure of the results of the 2022 Updated Expansion Study and any potential sale of the Eva Copper Project.

On September 28, 2022, CMMC released the results of the 2022 Updated Expansion Study and, on October 6, 2022, CMMC announced that it had entered into a definitive agreement to sell the Eva Copper Project. Concurrently, management continued to advance the preparation of the 2023 mine plan for the Copper Mountain Mine and the operating and capital budget of CMMC (collectively, the “2023 Budget”).

On October 12, 2022, Hudbay management presented the results of its technical due diligence review to the Technical Committee of the Hudbay Board, including management’s view of the 2022 Updated Expansion Study, as compared to management’s due diligence findings, and the terms of the Eva Copper Project sale.

During the remainder of October 2022 and early November 2022, representatives of CMMC and Hudbay re-engaged in informal dialogue regarding a potential combination and mutual due diligence continued, meeting occasionally, and on one occasion, including external financial advisors.    

 

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During this period, CMMC also received an oral non-binding indication of interest from another intermediate base metals producer (“Party C”) for a potential transaction involving the acquisition of CMMC by Party C. The indication of interest did not include financial or other key terms. On November 18, 2022, CMMC and Party C executed a confidentiality agreement and, shortly thereafter, the parties made available certain non-public financial and technical due diligence information to one another.

On November 14, 2022, the Hudbay Board met to receive an update on CMMC. At the meeting, management reviewed the strategic rationale for a proposed transaction with CMMC and presented the Hudbay Board with the results of its due diligence. Following a discussion, and after receiving input from Citi on financial considerations, the Hudbay Board provided management with the authority to present a revised non-binding offer to acquire CMMC within a certain valuation range. At a meeting the following day, Hudbay presented CMMC with a revised non-binding proposal that contemplated the acquisition of CMMC by Hudbay for all-share consideration at a floating exchange ratio that would represent a fixed premium of 15% based on a specified VWAP of each of the CMMC Shares and the Hudbay Shares on the TSX at the time of announcement.

After receiving feedback from CMMC that the 15% fixed premium proposal was not satisfactory, on November 30, 2022, Hudbay submitted a non-binding proposal (the “November 2022 Hudbay Proposal”) to CMMC that contemplated the acquisition of CMMC by Hudbay for all-share consideration at a floating exchange ratio that would represent a fixed premium of 21% based on a specified VWAP of each of the CMMC Shares and the Hudbay Shares on the TSX at the time of announcement. Based on the then-current share prices of the two companies, the November 2022 Hudbay Proposal implied an exchange ratio of 0.269 of a Hudbay Share for each CMMC Share which would result in CMMC Shareholders owning approximately 18.4% of the Combined Company on a fully diluted basis. The November 2022 Hudbay Proposal also indicated that Hudbay was prepared to purchase an aggregate of C$10,000,000 of CMMC Shares at a subscription price of C$1.60 per CMMC Share by way of a private placement concurrently with the execution of definitive agreements to address short-term liquidity issues resulting from certain operational challenges at the Copper Mountain Mine during the third quarter of 2022. In connection with the November 2022 Hudbay Proposal, Hudbay requested a 30-day exclusivity period in order to finalize transaction terms and definitive documentation.

On December 5, 2022, the CMMC Board met to review and consider the terms of the November 2022 Hudbay Proposal with members of senior management, CIBC and Davies in attendance. At the meeting, among other things: (a) Davies provided an overview of the fiduciary duties of directors in the context of a potential change of control transaction and related considerations applicable to various corporate stakeholders and refreshed its advice on the circumstances in which a special committee of the CMMC Board would be required or advisable and advised the CMMC Board on the form of special committee mandate that would be appropriate in the circumstances; (b) senior management provided an update on CMMC’s due diligence of Hudbay and CMMC’s financial condition; and (c) CIBC provided an evaluation of the strategic benefits of the potential combination and an analysis of the financial terms of the November 2022 Hudbay Proposal, as well as updated valuation perspectives on CMMC, including on both a stand-alone basis and combined basis with Hudbay. Following a discussion of potential responses to the November 2022 Hudbay Proposal and the receipt of financial and legal advice, the CMMC Board requested that senior management provide supplementary information regarding the 2023 Budget and the anticipated timing for the receipt of required regulatory approvals for the closing of the Eva Copper Project sale, before formulating a response to Hudbay.    

The CMMC Board reconvened on December 7, 2022 with members of senior management and Davies in attendance. Following discussion and consideration of the supplementary information provided by senior management and the receipt of legal advice from Davies, the CMMC Board directed senior management to advise Hudbay that it was prepared to enter into an exclusivity agreement providing for a limited ten-day exclusivity period in order to signal its endorsement of the compelling strategic rationale of a potential combination between the two companies and to permit the negotiation of improved financial terms on the condition that the standstill period contained in the 2021 Confidentiality Agreement (which was due to expire at the end of December 2022) be extended for a further six-month period.

 

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At the conclusion of the December 7, 2022 meeting, the CMMC Board constituted the CMMC Special Committee of independent directors (comprised of Mr. Edward Dowling (Chair), Ms. Michele Buchignani, Ms. Paula Rogers and Mr. Bill Washington) to more efficiently address matters arising in connection with the evaluation of a potential combination with Hudbay. The CMMC Board approved a broad mandate authorizing the Special Committee to, among other things: (a) continue the review and assessment of the terms of a potential combination with Hudbay with the assistance of financial, legal and other advisors, and make recommendations to the CMMC Board with respect thereto; (b) conduct and/or supervise the negotiation of the terms of a potential transaction; and (c) review, consider and make recommendations to the CMMC Board concerning any alternative proposals that may become available to CMMC. As part of its mandate, the Special Committee was also authorized to engage such financial, legal and other professional advisors as it may determine to be appropriate from time to time.

During the in camera session following the meeting of the CMMC Board on December 7, 2022, with Davies in attendance, the CMMC Board discussed the interest of Hudbay and each of Party A, Party B and Party C and considered the most effective manner to canvass any additional strategic alternatives that might be available to CMMC (including a formal strategic review process or further informal market check). Following discussion, the CMMC Board determined to revisit the matter in due course with the benefit of additional financial and legal advice.

An exclusivity agreement (the “Initial Exclusivity Agreement”) and an amendment to the 2021 Confidentiality Agreement to extend the expiration of the standstill period from December 22, 2022 to June 6, 2023, were executed by CMMC and Hudbay later on December 7, 2022.

On December 8, 2022, Goodmans provided Davies with an initial draft of the Arrangement Agreement reflecting the terms of the November 2022 Hudbay Proposal.

On December 10, 2022, the CMMC Special Committee met with members of senior management and Davies in attendance. At the meeting, Davies refreshed its advice on fiduciary duties and summarized the key terms of the draft Arrangement Agreement and other transaction structuring issues. Following discussion, the CMMC Special Committee provided instructions to Davies on the Arrangement Agreement and instructed management and Davies on various due diligence matters. Senior management also provided the CMMC Special Committee with an update on the anticipated closing of the sale of the Eva Copper Project and certain other operational cash flow matters. On December 12, 2022, following a call between the Chairs of each Board and the Chief Executive Officers, CMMC submitted a letter to Hudbay reiterating its interest in a potential combination of the two companies on improved financial terms and setting out its position on certain key transaction terms, including deal protections and post-closing governance.

Between December 11, 2022 and December 17, 2022, the CMMC Special Committee met on five occasions to further consider and discuss the terms of the Arrangement Agreement and other transaction structuring issues, in each case, with members of senior management, CIBC and Davies in attendance. At these meetings, the CMMC Special Committee received updated financial analysis and valuation perspectives from CIBC on the potential combination, together with updates from senior management regarding the financial condition of CMMC.

On December 15, 2022, CMMC completed the sale of the Eva Copper Project.

On December 16, 2022, the CMMC Board met with members of senior management, CIBC and Davies in attendance. Following an update from senior management on, among other things, the preparation of the 2023 Budget and CMMC’s financial condition (including the impact of the closing of the Eva Copper Project sale), the status of discussions and negotiations with Hudbay, and the key due diligence findings of CMMC and its external advisors to date, the CMMC Board received a presentation from CIBC with respect to updated valuation perspectives on CMMC, including on a stand-alone basis and combined basis with Hudbay. As part of this presentation, CIBC summarized the strategic options available to CMMC, including, among others: (a) CMMC’s stand-alone business plan and prospects; (b) a potential combination with

 

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Hudbay; and (c) a targeted strategic review process involving certain participants in the mining industry. Following discussion of, among other things, the fundamental value and prospects of CMMC, the improved financial condition of CMMC, and newly-developing social and political events in Peru, and the receipt of financial and legal advice, the CMMC Board determined that it was not prepared to proceed with a business combination with Hudbay on the terms contained in the November 2022 Hudbay Proposal. Immediately following the CMMC Board meeting, representatives of CMMC communicated the determination of the CMMC Special Committee to representatives of Hudbay, and the parties agreed to revisit discussions early in 2023.

Given the lack of agreement on key financial terms, the exclusivity period expired without any meaningful progress, and Hudbay’s CEO provided an update to Hudbay’s Board on December 20, 2022 regarding the pause in negotiations and the potential to re-engage in the new year. At that same time, Hudbay’s management and the Hudbay Board were focused on monitoring the dynamic political situation in Peru and its potential impact on Hudbay’s relative valuation.

Following the expiration of the exclusivity period contemplated in the Initial Exclusivity Agreement, CMMC received an oral non-binding indication of interest from Party B proposing a nil-premium “merger of equals” transaction that had been initially explored informally by representatives of the two companies in March 2022. The indication of interest did not include proposed financial or other terms. On December 23, 2022, CMMC and Party B executed an amended mutual confidentiality agreement, extending the original term thereof. In late December 2022 and early January 2023, representatives of CMMC and Party B held in-depth technical due diligence sessions in respect of one another’s material properties.

On January 12, 2023, Hudbay submitted a new non-binding proposal (the “January 2023 Hudbay Proposal”) to CMMC, which contemplated the acquisition of CMMC by Hudbay for a premium of 22% based on the 20-day VWAP of each of the CMMC Shares and the Hudbay Shares on the TSX at the time of announcement comprised of 0.295 of a Hudbay Share for each CMMC Share with the balance to be paid in cash. The share component of the January 2023 Hudbay Proposal would have resulted in CMMC Shareholders owning approximately 19.9% of the Combined Company on a fully diluted basis plus CMMC shareholders would have received (i) cash consideration and (ii) a contingent value right of up to an aggregate amount of US$30,000,000 payable in cash based on the cash proceeds received from the deferred consideration component of the sale of the Eva Copper Project to Harmony related to future mineral resource discoveries. In connection with the January 2023 Hudbay Proposal, Hudbay requested a

15-day exclusivity period in order to finalize transaction terms and definitive documentation.

On January 16, 2023, Mr. Dowling received a phone call from the Chief Executive Officer of an intermediate copper producer (“Party D”) during which Party D expressed its interest in pursuing a potential transaction involving the acquisition of CMMC by Party D, which was a concept previously discussed and explored by the parties in the summer of 2019. The indication of interest did not include proposed financial or other terms.

On January 17, 2023, the CMMC Special Committee met to receive an update on the status of CMMC’s engagement with each of Party A, Party B, Party C and Party D, and to review and consider the January 2023 Hudbay Proposal with members of senior management, CIBC and Davies in attendance. At the meeting, CIBC provided an updated evaluation of the strategic benefits of the potential combination, an analysis of the financial terms of the January 2023 Hudbay Proposal and updated valuation perspectives on CMMC, including on a stand-alone basis and combined basis with Hudbay. Following discussion and the receipt of financial and legal advice, the CMMC Special Committee directed Mr. Clausen to advise Hudbay that, while the strategic merit of a potential combination continued to be of interest, it was not prepared to enter into a transaction on the financial terms contained in the January 2023 Hudbay Proposal. In addition, the CMMC Special Committee directed Mr. Clausen to negotiate a mutual confidentiality agreement with Party D in order to facilitate further discussions. Following the execution of such agreement, representatives of CMMC and Party D, met to discuss a potential transaction and certain due diligence information was exchanged.

 

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Following communication that the financial terms of the January 2023 Hudbay Proposal were not adequate, representatives of Hudbay and CMMC met on several occasions to discuss potential opportunities to improve the financial terms of Hudbay’s offer. Hudbay subsequently advised CMMC that Hudbay was prepared to adjust the economic attributes of the proposed contingent value right, including by setting a floor of US$15,000,000 on the minimum amount payable thereunder.

Between January 19, 2023 and January 29, 2023, at the direction of the CMMC Special Committee, representatives of CMMC continued to engage in discussions regarding potential transactions with Hudbay and each of Party A, Party B, Party C and Party D, with a view to advancing each to a stage where it could make a specific transaction proposal.

On January 30, 2023, the CMMC Special Committee met with members of senior management, CIBC and Davies in attendance to review the strategic alternatives available to CMMC and to receive an update as to various discussions, and to determine the appropriate approach to further engagement, with each potential counterparty. At the meeting, CIBC delivered a presentation regarding its perspectives on the strategic rationale and potential financial aspects of each strategic alternative, and Davies refreshed its prior overview of the fiduciary duties of directors in the context of a change of control transaction, including with multiple potential counterparties. Following these presentations and ensuing discussions regarding, among other things, CMMC’s stand-alone business plan and prospects, the fundamental value of CMMC, the terms of the January 2023 Hudbay Proposal (including the adjusted terms of the contingent value right) relative to the strategic alternatives available to CMMC and the status of CMMC’s ongoing engagement with each of Party A, Party B, Party C and Party D, the CMMC Special Committee determined that it was not in the best interests of CMMC to proceed with the adjusted January 2023 Hudbay Proposal before developing a further understanding of the interests and intentions of each other counterparty. Accordingly, the CMMC Special Committee directed representatives of CMMC to contact representatives of each of Party A, Party B, Party C and Party D to understand their interest in pursuing a potential transaction with CMMC, the status of their due diligence and their anticipated timing to submit a written transaction proposal. During the period of ensuing site visits and discussions, Mr. Dowling provided regular updates to the CMMC Board.

On January 25, 2023 and February 1, 2023, Party B submitted preliminary valuation materials with respect to a potential combination between the two companies and advised that it remained interested in continuing discussions. During this period, Party C and Party D participated in a site visit to the Copper Mountain Mine and further discussions were conducted with Party A.

On February 2, 2023, representatives of CMMC were notified by representatives of Party D that Party D was not in a position to make an offer that the CMMC Board was likely to find compelling as it was focused on other opportunities.

On February 3, 2023, representatives of CMMC were notified by representatives of Party C that, in light of more advanced strategic alternatives available to it, Party C was not prepared to proceed with further discussions with CMMC at that time.

During this period, representatives of CMMC continued to advance discussions and due diligence with representatives of Hudbay.

On February 9, 2023, the CMMC Board met with members of senior management, CIBC and Davies in attendance, to receive an update on CMMC’s ongoing discussions with potential strategic counterparties and other strategic matters. At the meeting, the CMMC Board received an updated financial analysis of the adjusted January 2023 Hudbay Proposal and perspectives from senior management and CIBC on strategic considerations applicable to a potential combination with Party C. Following discussion and the receipt of financial and legal advice, the CMMC Board determined that the terms of the adjusted January 2023 Hudbay Proposal were superior to any proposed combination reasonably expected to be available with the other counterparties with which CMMC was then in discussions, and that continuing discussions with Hudbay with respect to a potential business combination on an exclusive basis was in the best interests of CMMC, subject to obtaining satisfactory clarifications on certain of the terms of the adjusted January 2023 Hudbay Proposal (which clarifications were provided by Hudbay on the following day).

 

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On February 10, 2023, CMMC and Hudbay entered into an exclusivity agreement providing for a three-week exclusivity period expiring on March 3, 2023.

On February 13, 2023, Mr. Kukielski provided an update to the Hudbay Board regarding the status of management’s discussions with CMMC, including the proposed deal terms, the execution of an exclusivity agreement and the due diligence and negotiations that remained in order to return to the Board to seek formal approval of a transaction. Also on February 13, 2023, Goodmans provided Davies with an updated draft of the Arrangement Agreement reflecting the terms of the adjusted January 2023 Hudbay Proposal.

On February 16, 2023, the CMMC Special Committee met with members of senior management, CIBC and Davies in attendance. Davies provided an overview of the key terms and issues identified in the Arrangement Agreement and ancillary agreements and, following the receipt of financial and legal advice, the CMMC Special Committee provided instructions to Davies regarding the transaction documents. At the meeting, the CMMC Special Committee also received updates on the respective due diligence reviews carried out by senior management, by Davies with respect to legal matters and by external consultants retained to provide more detailed advice with respect to certain social and political, permitting and environmental matters in Arizona and Peru. CIBC also provided an updated financial analysis of the terms of the adjusted January 2023 Hudbay Proposal based on recent capital markets developments.

During the in camera session following the meeting, and after receipt of legal advice, the CMMC Special Committee resolved to engage an independent financial advisor to provide a “long form” fairness opinion on a fixed-fee basis and interview at least two candidates before formalizing any engagement. Meetings were subsequently held with two potential financial advisors (including Origin), both of which confirmed their credentials and that they had no material relationships with CMMC.

On February 18, 2023, with the authorization of the CMMC Special Committee, Davies circulated a markup of the draft Arrangement Agreement to Goodmans.

On February 20, 2023, representatives of the CMMC Special Committee met with representatives of Hudbay to receive a management presentation from Hudbay with respect to its perspectives on the strategic rationale for a potential combination of the two companies and Hudbay’s long-term business plan.

On February 21, 2023, the CMMC Special Committee met with members of senior management, CIBC and Davies in attendance to discuss various structuring considerations and to receive further updates on the due diligence work completed by senior management, Davies and the in-depth diligence reviews being conducted by local advisors in Peru and Arizona. On the same day, a member of the CMMC Special Committee attended legal due diligence sessions with Hudbay, with members of senior management of CMMC, senior management of Hudbay, Davies and Goodmans in attendance.

On February 22, 2023, Goodmans provided Davies with a revised draft of the Arrangement Agreement, together with a list of several key unresolved commercial issues.

On February 23, 2023, the CMMC Board met with members of senior management, CIBC and Davies in attendance to receive an update on the status of discussions and negotiations with Hudbay and a summary of the key due diligence findings of CMMC and its external advisors to date. Davies provided an overview of the key commercial and other issues that remained unresolved in the Arrangement Agreement and ancillary transaction agreements.

Also, on February 23, 2023, the Hudbay Board met with senior management at its regularly scheduled Board meeting to discuss the status of the negotiations with CMMC and receive a presentation from senior management as to its financial analysis based on the current deal terms and structure. The Hudbay Board and senior management discussed the cash component of the proposed transaction and the extent to which it had increased since the January 2023 Hudbay Proposal due to changes in relative valuations and the offer consideration.

 

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Between February 23, 2023 and February 25, 2023, representatives of CMMC and Hudbay engaged in a number of discussions regarding the relative share price performance of the two companies since the date of the adjusted January 2023 Hudbay Proposal and its impact on the relative valuation and cash requirements under the transaction structure. In the context of such discussions, on February 24, 2023, Mr. Lei and Ms. Wong discussed potential changes to the transaction structure and consideration mix, which Ms. Wong subsequently reported to the CMMC Special Committee. On February 25, 2023, Hudbay delivered a letter to CMMC, which was preceded by a telephone conversation where Mr. Kukielski informed Mr. Dowling that the Hudbay Board was not prepared to proceed with the proposed transaction at that time due to, among other things, changes in the relative valuation of the two companies that made a potential transaction in accordance with the structure and consideration proposed less compelling at that time. Mr. Dowling acknowledged Mr. Kukielski’s notification and advised Mr. Kukielski that, in light of the suspended discussions, the CMMC Board intended to proceed with its stand-alone strategy and resume the succession planning process it had undertaken in connection with the announcement of Mr. Clausen’s planned retirement.    

On February 26, 2023, Mr. Kukielski advised the Hudbay Board that Hudbay had terminated discussions with CMMC for the reasons discussed with the Hudbay Board at its prior meeting.

On March 16, 2023, CMMC announced the conclusion of its succession planning process with the appointment of Mr. Patrick Merrin as President and Chief Executive Officer effective as of April 24, 2023.

On March 27, 2023, CMMC released its consolidated financial statements and results of operations for the year ended December 31, 2022. Hudbay released its annual mineral resource and mineral reserve estimate on March 30, 2023 and CMMC released its annual mineral resource and mineral reserve estimate for the Copper Mountain Mine on March 31, 2023.

At the Hudbay Board’s regularly scheduled meeting on March 29, 2023, Hudbay’s management provided the Hudbay Board with an update on its strategy regarding reengaging with CMMC to propose a revised transaction structure that eliminated the cash component of the offer and was aligned with the parameters previously established by the Hudbay Board. The Hudbay Board indicated it was supportive of management continuing to pursue the potential transaction on the basis discussed.

On April 1, 2023, Hudbay re-engaged with CMMC and submitted a revised non-binding proposal (the “April 2023 Hudbay Proposal”) to CMMC which contemplated the acquisition of CMMC by Hudbay for consideration of 0.295 of a Hudbay Share and 0.210 of a common share purchase warrant. The implied pro forma ownership for this proposal is not included as the number of warrants that might be exercised by former CMMC shareholders cannot be determined.

On April 2, 2023 and April 3, 2023, the CMMC Special Committee met with members of senior management, CIBC and Davies in attendance. At the meeting, CIBC delivered a presentation regarding the financial terms of the April 2023 Hudbay Proposal (including its views as to the appropriate valuation methodology of the proposed consideration warrants), as well as refreshed valuation perspectives on CMMC. Following discussion and the receipt of financial and legal advice, the CMMC Special Committee determined that the strategic rationale of a possible combination between the two companies remained compelling, but that the financial terms in the April 2023 Hudbay Proposal were still not sufficiently attractive to advance a potential transaction, in part as a result of differing views on the valuation methodology of the proposed consideration warrants. Accordingly, on April 4, 2023, CMMC communicated the determination of the CMMC Special Committee to Hudbay in a written response.

On April 6, 2023, Mr. Kukielski provided a further update to the Chair of the Hudbay Board and discussed management’s recommendation to submit a revised non-binding proposal.

 

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Following further discussion over the next few days among representatives of Hudbay and CMMC, on April 6, 2023, Hudbay submitted a further updated non-binding proposal (the “Improved April 2023 Hudbay Proposal”) to CMMC which contemplated the acquisition of CMMC by Hudbay for all-share consideration at an exchange ratio of 0.376 of a Hudbay Share for each CMMC Share, which would result in CMMC Shareholders owning approximately 24.1% of the Combined Company on a fully diluted basis.

On April 7, 2023 and April 8, 2023, the CMMC Special Committee met with members of senior management, CIBC and Davies in attendance. At these meetings, the CMMC Special Committee received presentations from CIBC with respect to the financial terms of the Improved April 2023 Hudbay Proposal and an updated analysis of the strategic benefits of the potential combination, as well as updated valuation perspectives on CMMC, including on a stand-alone and combined basis with Hudbay. Following discussion and the receipt of financial and legal advice, the CMMC Special Committee acknowledged the enhanced financial terms of the Improved April 2023 Hudbay Proposal, but determined that such terms were nonetheless still insufficiently attractive to proceed with a potential transaction with Hudbay absent further improvement. Accordingly, on April 8, 2023, CMMC delivered a written counterproposal to Hudbay requesting: (a) an exchange ratio of 0.376 of a Hudbay Share for each CMMC Share plus 0.05 of a common share purchase warrant (on equivalent terms as proposed in the April 2023 Hudbay Proposal); and (b) improvements to certain key commercial terms that remained unresolved in the February 22, 2023 draft of the Arrangement Agreement, including with respect to deal protections and the quantum of the termination fee that would be payable by each Party in certain circumstances.

On April 9, 2023, Mr. Kukielski updated the Chair of the Hudbay Board on the negotiations with CMMC, following which Hudbay submitted a “best and final” non-binding proposal (the “Final Hudbay Proposal”) to CMMC which contemplated the acquisition of CMMC by Hudbay for all-share consideration at an exchange ratio of 0.381 of a Hudbay Share for each CMMC Share, whereby CMMC Shareholders would own approximately 24.3% of the Combined Company on a fully diluted basis (as compared to approximately 18.4% of the Combined Company on a fully diluted basis based on the share exchange ratio implied by the November 2022 Hudbay Proposal). At the time of the announcement of the execution of the Arrangement Agreement, the Final Hudbay Proposal implied a value of C$2.67 per CMMC Share.

Following receipt of the Final Hudbay Proposal, on April 9, 2023, the CMMC Special Committee met with members of senior management, CIBC and Davies in attendance. At the meeting, CIBC delivered a presentation with respect to the financial terms of the Final Hudbay Proposal and Davies provided advice regarding the fiduciary duties of CMMC’s directors. Following discussion of, among other things: (a) CMMC’s stand-alone business plan and prospects and financial position and forecast; (b) the fundamental value of CMMC on a stand-alone basis; (c) the financial terms of the Final Hudbay Proposal; (d) the evolution of the financial and other terms of a potential combination with Hudbay since the Initial Hudbay Proposal; (e) the pro forma attributes and prospects of the Combined Company; and (f) the results of the efforts of CMMC to advance other strategic alternatives (including potential transactions involving each of Party A, Party B, Party C and Party D), and the receipt of financial and legal advice, the CMMC Special Committee determined that proceeding with the Final Hudbay Proposal was in the best interests of CMMC. As a result, the CMMC Special Committee directed senior management, CIBC and Davies to negotiate and settle the Arrangement Agreement and the ancillary agreements with a view to submitting the Arrangement to the CMMC Board for consideration by no later than the evening of April 12, 2023, and announcing the Arrangement by no later than the morning of April 13, 2023. At the direction of the CMMC Special Committee, Ms. Wong also contacted Origin to formalize its engagement as an independent financial advisor to provide a “long form” fairness opinion on a fixed-fee basis.

On April 9, 2023, Hudbay contacted TD Securities to engage them to provide the TD Securities Fairness Opinion.

On April 11, 2023, the Hudbay Board met to receive management’s financial analysis of the proposed transaction and to receive financial advice from Citi. Management also reviewed the strategic rationale for the transaction and presented its pro-forma financial analysis, including the forecasted accretion metrics, leverage ratios and synergies. The Hudbay Board indicated it was supportive of management continuing to negotiate the definitive documentation, with a targeted announcement of April 13, 2023.

 

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From April 10, 2023 through April 13, 2023, Davies and Goodmans exchanged further revised drafts of the Arrangement Agreement and the related ancillary transaction agreements and participated in discussions to resolve and settle the remaining outstanding issues. During this period, the CMMC Special Committee met on three occasions with members of senior management, CIBC and Davies in attendance to receive updates on the status of negotiations with respect to the Arrangement Agreement, the related ancillary transaction agreements and any outstanding due diligence matters, and to provide instructions, as necessary.

In the evening of April 12, 2023, the CMMC Special Committee met with members of senior management, CIBC, Origin and Davies in attendance to review and consider the terms of the Arrangement Agreement and the related ancillary transaction agreements and to discuss the announcement and marketing materials. Davies provided a presentation summarizing the key terms of the Arrangement Agreement, and the questions of the CMMC Special Committee regarding the Arrangement and the Arrangement Agreement were addressed by senior management, CIBC and Davies to the satisfaction of the CMMC Special Committee. The CMMC Special Committee also provided instructions to Davies with respect to the few remaining issues in the Arrangement Agreement that remained unresolved. Thereafter, each of CIBC and Origin provided its oral opinion that, as of the date of such opinion and subject to the assumptions, limitations and qualifications set out therein, the Consideration to be received by CMMC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the CMMC Shareholders.

Following discussion and the receipt of financial and legal advice and the CMMC Fairness Opinions, the CMMC Special Committee unanimously: (a) determined that the Arrangement is fair and reasonable to the CMMC Shareholders and in the best interests of CMMC; and (b) resolved to recommend that the CMMC Board approve the Arrangement Agreement and the Arrangement, and recommend that the CMMC Shareholders vote in favour of the Arrangement Resolution.

Immediately following the meeting of the CMMC Special Committee, the CMMC Board met to receive the report of the CMMC Special Committee and receive advice from its external financial and legal advisors. Davies provided a presentation summarizing the key terms of the Arrangement Agreement and the ancillary transaction agreements, and the questions of the CMMC Board regarding the Arrangement and the Arrangement Agreement were addressed by members of senior management, CIBC and Davies to the satisfaction of the CMMC Board. Thereafter, each of CIBC and Origin presented its financial analysis of the potential combination and provided its oral opinion that, as of the date of such opinion and subject to the assumptions, limitations and qualifications set out therein, the Consideration to be received by CMMC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the CMMC Shareholders. After discussion and careful deliberation and consultation with its financial and legal advisors, during which the CMMC Board considered the CMMC Fairness Opinions and the recommendation of the CMMC Special Committee as well as both the benefits and risks of the potential combination and satisfied itself that the benefits of the Arrangement outweighed the risks, the CMMC Board unanimously determined that the Arrangement is fair and reasonable to the CMMC Shareholders and in the best interests of CMMC, and unanimously resolved to recommend that the CMMC Shareholders vote in favour of the Arrangement Resolution.

Also in the evening of April 12, 2023, the Hudbay Board met to consider the approval of the proposed transaction. At the meeting, TD Securities presented its oral fairness opinion, Goodmans presented the Hudbay Board with an overview of the transaction structure, including key legal considerations related to the proposed arrangement, and presented the definitive transaction documents. Citi provided the Hudbay Board with its financial advice, and the Hudbay Board reviewed the announcement and marketing materials that had been prepared by management and its advisors. After discussion and careful deliberation and consultation with its financial and legal advisors, during which the Hudbay Board considered the TD Securities Fairness Opinion, as well as both the benefits and risks of the potential combination and satisfied itself that the benefits of the Arrangement outweighed the risks, the Hudbay Board unanimously determined that the entering into of the Arrangement Agreement was in the best interests of Hudbay, and unanimously resolved to recommend that Hudbay Shareholder vote in favour of the Hudbay Resolution.

 

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CMMC and Hudbay executed the Arrangement Agreement early in the morning of April 13, 2023 and jointly announced the Arrangement prior to the opening of trading on the TSX that morning.

Recommendation of the Hudbay Board

The Hudbay Board, having undertaken a thorough review of, and having carefully considered the terms of the Arrangement and the Arrangement Agreement, and after consulting with its financial and legal advisors, including having received and taken into account the TD Securities Fairness Opinion and such other matters as it considered necessary and relevant, including the factors set out below under the headings “Reasons for the Arrangement” and “Additional Hudbay Reasons”, has unanimously determined that the Arrangement is in the best interests of Hudbay and has authorized Hudbay to enter into the Arrangement Agreement and all related agreements.

Accordingly, the Hudbay Board has unanimously approved the Arrangement and the entering into by Hudbay of the Arrangement Agreement and unanimously recommends that the Hudbay Shareholders vote FOR the Hudbay Resolution.

Recommendation of the CMMC Special Committee

The CMMC Special Committee, having undertaken a thorough review of, and having carefully considered the terms of the Arrangement and the Arrangement Agreement, and after consulting with its financial and legal advisors, including having received and taken into account the CMMC Fairness Opinions and such other matters as it considered necessary and relevant, including the factors set out below under the headings “Reasons for the Arrangement” and “Additional CMMC Reasons”, unanimously determined that the Arrangement is in the best interests of CMMC and that the Arrangement is fair and reasonable to the CMMC Shareholders and has unanimously recommended to the CMMC Board that the CMMC Board approve the Arrangement and the entering into by CMMC of the Arrangement Agreement and recommend that the CMMC Shareholders vote FOR the Arrangement Resolution.

Recommendation of the CMMC Board

The CMMC Board, having undertaken a thorough review of, and having carefully considered the terms of the Arrangement and the Arrangement Agreement, and after consulting with its financial and legal advisors, including having received and taken into account the CMMC Fairness Opinions, the unanimous recommendation of the CMMC Special Committee and such other matters as it considered necessary and relevant, including the factors set out below under the headings “Reasons for the Arrangement” and “Additional CMMC Reasons”, unanimously determined that the Arrangement is in the best interests of CMMC and that the Arrangement is fair and reasonable to the CMMC Shareholders.

Accordingly, the CMMC Board has unanimously approved the Arrangement and the entering into by CMMC of the Arrangement Agreement and unanimously recommends that the CMMC Shareholders vote FOR the Arrangement Resolution.

Reasons for the Arrangement

In making their respective recommendations, the Hudbay Board and the CMMC Board reviewed and considered a number of factors relating to the Arrangement, including those listed below, with the benefit of advice from their respective senior management teams and financial and legal advisors and, in the case of the CMMC Board, input from, and the unanimous recommendation of, the CMMC Special Committee. The following is a summary of the principal reasons for the respective recommendations of the Hudbay Board and the CMMC Board:

 

   

Creates a Leading Intermediate Copper-Focused Producer with Enhanced Scale. The Combined Company will have a larger-scale platform backed by three long-life operating mines with exploration and expansion upside, three large-scale development projects and one of the largest mineral resource bases among intermediate copper producers.

 

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Increased Diversification in Tier-One Mining Jurisdictions. The Combined Company will have a geographically balanced portfolio in tier-one mining jurisdictions (Peru, Canada and the United States).

 

   

Access to Efficiencies and Synergies. The combination of Hudbay and CMMC creates a unique opportunity to apply Hudbay’s operating efficiency practices to the Copper Mountain Mine. The Combined Company is expected to generate an estimated $30 million per year of operating efficiencies and corporate synergies after three years. 3

 

   

Provides the Financial Strength to Deleverage While Investing in Growth Projects. The Combined Company will be well-positioned for accelerated deleveraging in the near-term from increased diversification of cash flows and enhanced exposure to rising copper prices. The increased financial strength of the Combined Company is expected to provide enhanced financial flexibility to maximize value from a larger organic growth pipeline by more efficiently allocating capital to projects that yield the highest risk-adjusted returns. The Combined Company’s greater cash flow generation and strong balance sheet also will enhance the Combined Company’s ability to advance brownfield expansion opportunities and prudently develop Hudbay’s Copper World project in Arizona, which is expected to deliver meaningful growth to the Combined Company.

 

   

Valuation Re-rating Potential. The strategic and financial benefits from the Arrangement are expected to position the Combined Company for a valuation re-rating.

 

   

Enhanced Leadership Team and Board of Directors. The Combined Company will be comprised of an experienced senior executive team that has a wealth of industry knowledge and complementary expertise in developing and operating open pit and underground copper mines. Following closing of the Arrangement, the Hudbay Board will include two directors from the CMMC Board, and the management team of Hudbay is expected to include select members from the management team of CMMC.

 

   

Comprehensive Arm’s Length Negotiations. The terms of the Arrangement Agreement and the Arrangement are the result of a comprehensive negotiation process, undertaken with the oversight and participation of Hudbay’s and CMMC’s respective financial and legal advisors.

 

   

Shareholder and Court Approval. The Arrangement is subject to the following shareholder and court approvals, which protect Hudbay Shareholders and CMMC Shareholders, and confirms that that Arrangement treats all stakeholders of Hudbay and CMMC equitably and fairly:

 

   

The Arrangement Resolution must be approved by (a) at least two-thirds of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, and (b) a simple majority of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, excluding the votes required to be excluded by MI 61-101, as described under “Securities Law Matters – Interests of Certain Persons in the Arrangement – Multilateral Instrument 61-101”.

 

3 

Pre-tax annual synergies achieved over the course of three years.

 

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The Hudbay Resolution must be approved by at least a simple majority of the votes cast by Hudbay Shareholders present virtually or represented by proxy at the Hudbay Meeting.

 

   

The Arrangement is subject to a determination of the Court that the terms and conditions of the Arrangement are fair and reasonable, both procedurally and substantively, to the rights and interests of CMMC Shareholders and other affected persons.

 

   

Competition Act Approval. The likelihood being very high that the transaction would receive the Competition Act Approval under applicable Laws (such Competition Act Approval was received on May 8, 2023 as expected), and the fact that no other regulatory approvals are required.

 

   

Ability to Close. Each of Hudbay and CMMC is committed to completing the Arrangement and anticipates that the Parties will be able to complete the Arrangement, which is subject only to typical closing conditions for a transaction of this nature, within a reasonable time and in any event prior to the Outside Date.

 

   

Superior Proposals. The Arrangement Agreement permits the Hudbay Board and the CMMC Board, in the exercise of their respective fiduciary duties, to respond, prior to the Hudbay Meeting and the CMMC Meeting, respectively, to certain unsolicited Acquisition Proposals that are or could reasonably be expected to be more favourable, from a financial point of view, to Hudbay Shareholders or CMMC Shareholders, as the case may be, than the Arrangement.

 

   

Support of Directors and Senior Officers. Directors and certain senior officers of Hudbay and CMMC have entered into the Hudbay Support and Voting Agreements and the CMMC Support and Voting Agreements, respectively, pursuant to which they have agreed, among other things and subject to the terms and conditions of thereof, to vote their Hudbay Shares in favour of the Hudbay Resolution and to vote their CMMC Shares in favour of the Arrangement Resolution, as applicable.

See “Information Concerning Hudbay Following the Arrangement” for further information concerning Hudbay following completion of the Arrangement.

Additional Hudbay Reasons

In addition to the factors listed above in “Reasons for the Arrangement”, the Hudbay Board also considered and relied upon the following factors in making its unanimous recommendation to Hudbay Shareholders to vote FOR the Hudbay Resolution:

 

   

Participation in Future Growth. Hudbay Shareholders will participate in future increases in the value of the Combined Company and the opportunities associated with the Combined Company’s assets and properties. Following completion of the Arrangement, Current Hudbay Shareholders are expected to own approximately 76% of the Hudbay Shares in the Combined Company (on a non-diluted basis) based on the number of Hudbay Shares and CMMC Shares issued and outstanding as of April 12, 2023 (the business day immediately prior to the announcement of the Arrangement).

 

   

TD Securities Fairness Opinion. The TD Securities Fairness Opinion provided to the Hudbay Board to the effect that, as of April 12, 2023 and based upon the assumptions, limitations and qualifications set out therein, the Consideration to be paid by Hudbay to the CMMC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to Hudbay.

 

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Advice from Citi. Hudbay engaged Citi to provide financial advice in connection with the Arrangement and the Hudbay Board relied on such advice in its assessment of the Arrangement.

 

   

Review by Hudbay Board. The terms of the Arrangement are the result of a comprehensive due diligence and negotiation process, undertaken with the oversight and participation of Hudbay’s legal counsel, and in the judgment of the Hudbay Board relying on financial, legal and other advisors and discussions with management and their review of the TD Securities Fairness Opinion, the Exchange Ratio and the Consideration to be paid to the CMMC Shareholders is fair from a financial point of view to Hudbay.

 

   

Other Factors. The Hudbay Board considered the Arrangement and Hudbay’s competitive position within the industry against the standalone Hudbay portfolio and with reference to other alternatives.

In making its determinations and recommendations with respect to the Arrangement, the Hudbay Board also considered a number of potential risks and potential negative factors, which the Hudbay Board concluded were outweighed by the positive substantive and procedural factors of the Arrangement described above, including the following:

 

   

the risks to Hudbay if the Arrangement is not completed, including the costs to Hudbay in pursuing the Arrangement, the significant attention required of management to implement the Arrangement, restrictions on the conduct of Hudbay’s business prior to completion of the Arrangement, and the potential impact on Hudbay’s current business operations and relationships (including with current and prospective employees, customers, distributors, suppliers and partners);

 

   

conditions to CMMC’s obligation to complete the Arrangement and the right of CMMC to terminate the Arrangement Agreement under certain circumstances;

 

   

the limitations contained in the Arrangement Agreement on Hudbay’s ability to solicit interest from third parties and the fact that if the Arrangement Agreement is terminated under certain circumstances, Hudbay must pay the Hudbay Termination Payment to CMMC; and

 

   

the change of control entitlements of CMMC Executives, as discussed in “Securities Law Matters—Interests of Certain Persons in the Arrangement Termination and Change of Control Payments”.

The foregoing summary of the information and factors considered by the Hudbay Board is not intended to be exhaustive but includes the material information and factors considered by the Hudbay Board in its consideration of the Arrangement. Due to the wide variety of factors and information considered in connection with its evaluation of the Arrangement, the Hudbay Board did not find it practicable to, and therefore did not, quantify or otherwise attempt to assign any relative weight to each specific factor or item of information considered in reaching its conclusions and recommendation. In addition, individual members of the Hudbay Board may have given different weight to various factors or items of information.

The Hudbay Board’s reasons for recommending the Arrangement include certain assumptions relating to forward-looking information, and such information and assumptions are subject to various risks. See “Joint Management Information CircularCautionary Statement Regarding Forward-Looking Statements” and “Risk Factors”.

 

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Additional CMMC Reasons

In addition to the factors listed above in “Reasons for the Arrangement”, the CMMC Board also considered and relied upon the following factors in making its unanimous recommendation to CMMC Shareholders to vote FOR the Arrangement Resolution:

 

   

Participation in a Leading Intermediate Copper Producer. Following completion of the Arrangement, CMMC Shareholders will own approximately 24% of the Combined Company (on a non-diluted basis) based on the number of Hudbay Shares and CMMC Shares issued and outstanding as of April 12, 2023 (the business day immediately prior to the announcement of the Arrangement). This provides CMMC Shareholders with meaningful ownership in the Combined Company that will, on completion of the Arrangement, be the third largest copper producer in Canada. This will provide CMMC Shareholders with the opportunity to participate in future increases in the value of the Combined Company and the opportunities and synergies associated with the Combined Company’s assets and properties. The meaningful ownership interest in the Combined Company is expected to provide a number of strategic benefits to CMMC Shareholders as compared to CMMC as a standalone entity:

 

   

Increased scale and enhanced portfolio. With three long-life operating mines with exploration and expansion upside, three large-scale development projects and one of the largest mineral resource bases among intermediate copper producers, the Combined Company effectively addresses the risks associated with CMMC’s dependence on a single asset.

 

   

Exposure to a diversified asset base. In addition to Canada, through the Combined Company, CMMC Shareholders will also gain exposure to another top-tier mining jurisdiction in Peru, as well as a geographically balanced portfolio with approximately 55% of net asset value estimated to be from North American assets and 45% of net asset value estimated to be from South American assets (based on analyst consensus estimates).

 

   

Increased production at lower cost. The Combined Company has an expected 2023 copper production of more than 150,000 tonnes, which represents an increase of approximately 270% over CMMC’s 2023 expected copper production, and is further complemented by meaningful gold production. The Combined Company would also benefit from its expected position in the second quartile of the copper cost curve, 4 which represents a decrease of approximately 50% as compared to CMMC’s 2023 cash cost profile on a standalone basis.

 

   

Improved capital allocation profile for growth opportunities. The Combined Company’s greater cash flow generation and strong balance sheet will enable CMMC Shareholders to benefit from attractive risk-adjusted growth from brownfield expansions and greenfield growth opportunities within the enhanced combined portfolio.

 

   

Improved Trading Liquidity and Enhanced Capital Markets Profile. With a market capitalization of approximately C$2.4 billion (on a fully-diluted basis, based on the closing prices of Hudbay Shares and CMMC Shares on the TSX on April 12, 2023, the last trading day prior to the announcement of the Arrangement), the Combined Company will have a significantly greater market capitalization and greater trading liquidity than CMMC would on a stand-alone basis.

 

4 

Based on Wood Mackenzie’s 2023 by-product C1 copper cost curve (Q4 2022 dataset).

 

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CMMC Shareholders Receive an Immediate Premium. The Consideration to be received by CMMC Shareholders represents a premium of approximately 23% based on the 10-day volume-weighted average price of the Hudbay Shares and CMMC Shares on the TSX on April 12, 2023, the last trading day prior to the announcement of the Arrangement.

 

   

CIBC Fairness Opinion. The CIBC Fairness Opinion provided to the CMMC Board, to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Consideration to be received by the CMMC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the CMMC Shareholders.

 

   

Origin Fairness Opinion. The Origin Fairness Opinion provided to the CMMC Special Committee and the CMMC Board, to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Consideration to be received by the CMMC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the CMMC Shareholders. None of the fees payable to Origin are contingent on completion of the Arrangement.

 

   

Role of Special Committee. The Arrangement was reviewed and evaluated by the CMMC Special Committee, comprised of members of the CMMC Board who are independent of Hudbay and of management of CMMC. In addition, the terms of the Arrangement are the result of a comprehensive negotiation process, undertaken with the participation of CMMC’s financial and legal advisors. After consulting with its financial and legal advisors, including having received and taken into account the CMMC Fairness Opinions and such other matters as it considered necessary and relevant, the CMMC Special Committee unanimously determined that the Arrangement is in the best interests of CMMC and that the Arrangement is fair and reasonable to the CMMC Shareholders and has unanimously recommended to the CMMC Board that the CMMC Board approve the Arrangement and the entering into by CMMC of the Arrangement Agreement and recommend that the CMMC Shareholders vote in favour of the Arrangement Resolution.

 

   

Consideration of Strategic Alternatives. The CMMC Board has periodically reviewed a range of strategic alternatives for creating shareholder value and, in the ordinary course of business, has had regular engagement with several industry peers exploring potential opportunities, including considering other potential transactions. In 2022 and early 2023, CMMC provided due diligence access in connection with a potential change of control transaction to four prospective counterparties (excluding Hudbay), but either did not receive a formal proposal or did not receive a compelling offer, and determined with the benefit of input from the CMMC Special Committee and its financial and legal advisors that the Arrangement was in the best interests of CMMC and the CMMC Shareholders over the long term. See “The Arrangement – Background to the Arrangement”. The opportunity to combine CMMC with Hudbay to create a leading intermediate copper producer is a compelling one and is expected to provide various opportunities to create sustained, long-term value for CMMC Shareholders while maintaining significant exposure to copper.

 

   

Dissent Rights. Any registered CMMC Shareholders entitled to vote on the Arrangement may exercise Dissent Rights and is entitled to be paid fair value for its CMMC Shares as determined by a Court, subject to strict compliance with all requirements applicable to the exercise of Dissent Rights. See “Dissenting Shareholder Rights”.

 

   

Reciprocal terms of the Arrangement Agreement. Key terms of the Arrangement Agreement, including non-solicitation covenants, termination fee amounts and triggers, are reciprocal between CMMC and Hudbay.

 

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Reasonable termination payment. The CMMC Board determined that the C$22 million CMMC Termination Payment, which is payable in certain circumstances described under “The Arrangement Agreement – Termination of the Arrangement Agreement”, is reasonable. In the view of the CMMC Board, the CMMC Termination Payment would not preclude a third party from potentially making a CMMC Superior Proposal.

 

   

Tax Deferred Roll-Over. The exchange of CMMC Shares for Hudbay Shares pursuant to the Arrangement will generally be a tax-deferred transaction for Canadian federal income tax purposes for CMMC Shareholders who are resident in Canada and who do not elect to report a capital gain or loss on their Canadian federal income tax return in respect of the Arrangement, subject to the assumptions, qualifications and discussion under the heading “Certain Canadian Federal Income Tax Considerations”. The exchange of CMMC Shares for Hudbay Shares pursuant to the Arrangement is also intended to be treated as part of a tax-deferred “reorganization” within the meaning of Section 368 of the U.S. Tax Code. If such exchange qualifies as part of a reorganization, gain or loss generally would not be recognized by U.S. Holders for U.S. federal income tax purposes on their receipt of Hudbay Shares in exchange for CMMC Shares pursuant to the Arrangement, subject to the assumptions, qualifications and discussion under the heading “Certain United States Federal Income Tax Considerations”.

 

   

Other Factors. The CMMC Board also considered the Arrangement with reference to the financial condition and results of operations of CMMC, as well as its prospects, strategic alternatives and competitive position, including the risks involved in achieving those prospects and pursuing those alternatives in light of current market conditions, CMMC’s financial position, and operational challenges that affected the Copper Mountain Mine in 2022. The CMMC Board also considered the financial condition and results of operations of Hudbay, as well as its growth prospects, including the risks involved in achieving those prospects in light of the recent period of political instability in Peru.

In making its determinations and recommendations with respect to the Arrangement, the CMMC Board also considered a number of potential risks and potential negative factors, which the CMMC Board concluded were outweighed by the positive substantive and procedural factors of the Arrangement described above, including the following:

 

   

the risks to CMMC if the Arrangement is not completed, including the costs to CMMC in pursuing the Arrangement, the significant attention required of management to implement the Arrangement, restrictions on the conduct of CMMC’s business prior to completion of the Arrangement, and the potential impact on CMMC’s current business operations and relationships (including with current and prospective employees, customers, distributors, suppliers and partners);

 

   

conditions to Hudbay’s obligation to complete the Arrangement and the right of Hudbay to terminate the Arrangement Agreement in certain circumstances; and

 

   

the limitations in the Arrangement Agreement on CMMC’s ability to solicit interest from third parties, as mitigated by the provisions in the Arrangement Agreement that allow CMMC to engage in discussions or negotiations regarding any unsolicited Acquisition Proposal received prior to the approval of the Arrangement Resolution by CMMC Shareholders that constitutes or could reasonably be expected to constitute or lead to a CMMC Superior Proposal.

The foregoing summary of the information and factors considered by the CMMC Board is not intended to be exhaustive but includes the material information and factors considered by the CMMC Board in its consideration of the Arrangement. Due to the wide variety of factors and information considered in connection with its evaluation of the Arrangement, the CMMC Board did not find it practicable to, and therefore did not, quantify or otherwise attempt to assign any relative weight to each specific factor or item of information considered in reaching its conclusions and recommendation. In addition, individual members of the CMMC Board may have given different weight to various factors or items of information.

 

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The CMMC Board’s reasons for recommending the Arrangement include certain assumptions relating to forward-looking information, and such information and assumptions are subject to various risks. See “Joint Management Information Circular – Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors”.

CMMC Fairness Opinions

Origin Fairness Opinion

Origin Merchant Partners (“Origin”) was retained by the CMMC Special Committee to act as its independent financial advisor in connection with the Arrangement. The engagement includes providing the CMMC Special Committee with financial advisory services related to the Arrangement, including providing an opinion as to the fairness, from a financial point of view, of the Consideration to the CMMC Shareholders.

At a meeting of the CMMC Special Committee held on April 12, 2023, Origin orally delivered its opinion to the CMMC Special Committee and the CMMC Board, which was subsequently confirmed in writing, to the effect that, as at the date thereof and based upon the assumptions, limitations and qualifications set out therein, the Consideration to be received by CMMC Shareholders pursuant to the Arrangement Agreement is fair, from a financial point of view, to the CMMC Shareholders. The full text of the Origin Fairness Opinion, setting out, among other things, the scope of review, assumptions made, matters considered and limitations and qualifications on the review undertaken in connection with the Origin Fairness Opinion, is attached as Appendix H to this Circular. This summary of the Origin Fairness Opinion is qualified in its entirety by reference to the full text of the opinion.

Pursuant to the terms of its engagement letter with Origin dated April 10, 2023, CMMC agreed to pay Origin a fixed engagement fee and a fixed fee for rendering the Origin Fairness Opinion (none of which are contingent upon the conclusions reached in the Origin Fairness Opinion or the completion of the Arrangement). CMMC has also agreed to reimburse Origin for its reasonable out-of-pocket expenses incurred in connection with its services and to indemnify Origin against certain liabilities that might arise out of its engagement. The payment of expenses is not dependent on the completion of the Arrangement.

The Origin Fairness Opinion was prepared at the request of and for the information and assistance of the CMMC Special Committee in connection with its consideration of the Arrangement. The Origin Fairness Opinion is not a recommendation to any CMMC Shareholder as to how to vote on the Arrangement Resolution or act on any matter relating to the Arrangement or a recommendation to the CMMC Special Committee to enter into the Arrangement Agreement. The Origin Fairness Opinion does not address any other aspect of the Arrangement and no opinion or view was expressed as to the relative merits of the Arrangement in comparison to other strategies or transactions that might be available to CMMC or in which CMMC might engage or as to the underlying business decision of CMMC to proceed with or effect the Arrangement. The Origin Fairness Opinion is only one factor that was taken into consideration by the CMMC Special Committee in making its unanimous recommendation to the CMMC Board that the CMMC Board determine that the Arrangement is in the best interest of CMMC and that the Consideration is fair to the CMMC Shareholders, that the CMMC Board authorize CMMC to enter into the Arrangement Agreement and all related agreements and recommend that CMMC Shareholders vote in favour of the Arrangement Resolution. See “The Arrangement – Reasons for the Arrangement” and “The Arrangement – Additional CMMC Reasons”. Neither Origin nor any of its affiliates is an insider, associate or affiliate (as such terms are defined in applicable Canadian Securities Laws) of Hudbay or CMMC or any of their respective associates or affiliates.

The CMMC Special Committee and the CMMC Board urges CMMC Shareholders to review the Origin Fairness Opinion carefully and in its entirety. See Appendix H of this Circular.

 

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CIBC Fairness Opinion

CIBC World Markets Inc. (“CIBC”) was retained by CMMC to act as its financial advisor in connection with the Arrangement. The engagement includes providing CMMC with financial advisory services related to the Arrangement, including providing an opinion as to the fairness of the Consideration to be received by CMMC Shareholders pursuant to the Arrangement Agreement, from a financial point of view, to CMMC Shareholders.

At a meeting of the CMMC Board held on April 12, 2023, CIBC orally delivered its opinion to the CMMC Special Committee and the CMMC Board, which was subsequently confirmed in writing to the CMMC Board, to the effect that, as at the date thereof and based upon the assumptions, limitations and qualifications set out therein, the Consideration to be received by CMMC Shareholders pursuant to the Arrangement Agreement is fair, from a financial point of view, to CMMC Shareholders. The full text of the CIBC Fairness Opinion, setting out, among other things, the scope of review, assumptions made, matters considered and limitations and qualifications on the review undertaken in connection with the CIBC Fairness Opinion, is attached as Appendix I to this Circular. This summary of the CIBC Fairness Opinion is qualified in its entirety by reference to the full text of the opinion.

Pursuant to the terms of its engagement letter with CIBC dated effective September 14, 2022, CMMC agreed to pay CIBC a fixed fee upon CMMC entering into the Arrangement Agreement, a fixed fee for rendering the CIBC Fairness Opinion (which is not contingent on the conclusions reached in the CIBC Fairness Opinion or the completion of the Arrangement), and an additional fee that is contingent on completion of the Arrangement. CMMC has also agreed to reimburse CIBC for its reasonable out-of-pocket expenses incurred in connection with its services and to indemnify CIBC against certain liabilities that might arise out of its engagement. The payment of expenses is not dependent on the completion of the Arrangement.

The CIBC Fairness Opinion was prepared at the request of and for the information and assistance of the CMMC Board in connection with its consideration of the Arrangement. The CIBC Fairness Opinion is not a recommendation to any CMMC Shareholder as to how to vote on the Arrangement Resolution or act on any matter relating to the Arrangement or a recommendation to the CMMC Board to enter into the Arrangement Agreement. The CIBC Fairness Opinion does not address any other aspect of the Arrangement and no opinion or view was expressed as to the relative merits of the Arrangement in comparison to other strategies or transactions that might be available to CMMC or in which CMMC might engage or as to the underlying business decision of CMMC to proceed with or effect the Arrangement. The CIBC Fairness Opinion is only one factor that was taken into consideration by the CMMC Board in approving the terms of the Arrangement Agreement and all related agreements and making its unanimous determination that the Arrangement is in the best interests of CMMC and that the Consideration is fair to the CMMC Shareholders and to recommend that the CMMC Shareholders vote in favour of the Arrangement Resolution. See “The Arrangement – Reasons for the Arrangement” and “The Arrangement – Additional CMMC Reasons”. Neither CIBC nor any of its affiliates is an insider, associate or affiliate (as such terms are defined in applicable Canadian Securities Laws) of Hudbay or CMMC or any of their respective associates or affiliates.

The CMMC Board urges CMMC Shareholders to review the CIBC Fairness Opinion carefully and in its entirety. See Appendix I of this Circular.

Hudbay Fairness Opinion

TD Securities Fairness Opinion

TD Securities was retained by Hudbay to act as one of its financial advisors in connection with the Arrangement. The engagement includes providing Hudbay with financial advisory services related to the Arrangement, including providing an opinion as to the fairness, from a financial point of view, to Hudbay, of the Consideration to be paid by Hudbay to the CMMC Shareholders pursuant to the Arrangement.

 

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At a meeting of the Hudbay Board held on April 12, 2023, TD Securities orally delivered its opinion to the Hudbay Board, which was subsequently confirmed in writing, that, as at the date thereof and based upon the assumptions, limitations and qualifications set out therein, the Consideration to be paid pursuant to the Arrangement by Hudbay is fair, from a financial point of view, to Hudbay. The full text of the TD Securities Fairness Opinion, setting out, among other things, the scope of review, assumptions made, matters considered and limitations and qualifications on the review undertaken in connection with the TD Securities Fairness Opinion, is attached as Appendix J to this Circular. This summary of the TD Securities Fairness Opinion is qualified in its entirety by reference to the full text of the opinion and Hudbay Shareholders are urged to read the TD Securities Fairness Opinion in its entirety.

Pursuant to the terms of its engagement letter with TD Securities dated effective April 11, 2023, Hudbay agreed to pay TD Securities fees for its services as a financial advisor, including a fixed fee for presenting its preliminary indications of value to the Hudbay Board, a fixed fee for rendering the TD Securities Fairness Opinion (which is not contingent on the substance of or conclusions reached in the TD Securities Fairness Opinion or the completion of the Arrangement), and a fixed fee if TD Securities is required to provide a revised fairness opinion. Hudbay has also agreed to reimburse TD Securities for its reasonable out-of-pocket expenses incurred in connection with its services and to indemnify TD Securities against certain liabilities that might arise out of its engagement. The payment of expenses is not dependent on the completion of the Arrangement.

The TD Securities Fairness Opinion was prepared at the request of and for the information and assistance of the Hudbay Board in connection with its consideration of the Arrangement. The TD Securities Fairness Opinion is not a recommendation to any Hudbay Shareholder as to how to vote on the Hudbay Resolution or act on any matter relating to the Arrangement. The TD Securities Fairness Opinion does not address any other aspect of the Arrangement and no opinion or view was expressed as to the relative merits of the Arrangement in comparison to other strategies or transactions that might be available to Hudbay or in which Hudbay might engage or as to the underlying business decision of Hudbay to proceed with or effect the Arrangement. The TD Securities Fairness Opinion is only one factor that was taken into consideration by the Hudbay Board in approving the terms of the Arrangement Agreement and the Plan of Arrangement and making its unanimous determination that the Arrangement is in the best interests of Hudbay and to recommend that the Hudbay Shareholders vote in favour of the Hudbay Resolution. See “The Arrangement – Reasons for the Arrangement” and “The Arrangement – Additional Hudbay Reasons”. Neither TD Securities nor any of it affiliates is an insider, associate or affiliate (as such terms are defined in applicable Canadian Securities Laws) of Hudbay or CMMC or any of their respective associates or affiliates.

The Hudbay Board urges Hudbay Shareholders to review the TD Securities Fairness Opinion carefully and in its entirety. See Appendix J of this Circular.

Support and Voting Agreements

CMMC has entered into Hudbay Support and Voting Agreements with the directors and senior officers of Hudbay, pursuant to which the Hudbay Supporting Shareholders have agreed, among other things and subject to the terms and conditions of the Hudbay Support and Voting Agreements, to vote their Hudbay Shares in favour of the Hudbay Resolution to approve the issuance of Hudbay Shares in connection with the Arrangement. As at the Hudbay Record Date, the Hudbay Supporting Shareholders collectively beneficially owned or exercised control or direction over 723,833 Hudbay Shares, representing approximately 0.28% of the issued and outstanding Hudbay Shares.

The Hudbay Support and Voting Agreements establish, among other things, the agreement of the Hudbay Supporting Shareholders party thereto to: (a) vote their Hudbay Shares (i) in favour of the approval, consent, ratification and adoption of the Hudbay Resolution and any other matter necessary for the consummation of the Arrangement, and (ii) against any resolution, action, proposal, transaction or agreement proposed by any other Person, that would reasonably be expected to adversely affect or reduce the likelihood of the successful completion of the Arrangement, or delay or interfere with the completion of the Arrangement; and (b) not (i) sell, transfer, gift, assign, grant a participation interest in, option, pledge, hypothecate, grant a security or voting interest in or otherwise convey or encumber (each, a “Transfer”), or enter into any agreement, option or other arrangement (including any profit sharing arrangement, forward sale or other monetization arrangement) with respect to the Transfer of any of their Hudbay Shares to any Person, other than pursuant to the Arrangement Agreement, or (ii) agree to take any of the foregoing actions.

 

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The Hudbay Support and Voting Agreements automatically terminate upon the earliest to occur of: (a) the Effective Time; (b) the date on which the Arrangement Agreement is terminated in accordance with its terms; (c) the date on which, without consent of the Hudbay Supporting Shareholder, the terms of the Arrangement Agreement are varied in a manner that is materially adverse to the Hudbay Supporting Shareholder (other than an increase in the Consideration payable pursuant to the Arrangement); and (d) the Outside Date.

Hudbay has entered into CMMC Support and Voting Agreements with the directors and certain senior officers of CMMC, pursuant to which the CMMC Supporting Shareholders have agreed, among other things and subject to the terms and conditions of the CMMC Support and Voting Agreements, to vote their CMMC Shares in favour of the Arrangement Resolution to approve the Arrangement. As at the CMMC Record Date, the CMMC Supporting Shareholders collectively beneficially owned or exercised control or direction over 7,886,800 CMMC Shares, representing approximately 3.68% of the issued and outstanding CMMC Shares.

The CMMC Support and Voting Agreements establish, among other things, the agreement of the CMMC Supporting Shareholders party thereto to: (a) vote their CMMC Shares (i) in favour of the approval, consent, ratification and adoption of the Arrangement Resolution and any other matter necessary for the consummation of the Arrangement, and (ii) against any resolution, action, proposal, transaction or agreement proposed by any other Person, that would reasonably be expected to adversely affect or reduce the likelihood of the successful completion of the Arrangement, or delay or interfere with the completion of the Arrangement; (b) not exercise any rights of dissent or rights of appraisal in connection with the Arrangement; and (c) not (i) Transfer, or enter into any agreement, option or other arrangement (including any profit sharing arrangement, forward sale or other monetization arrangement) with respect to the Transfer of any of their CMMC Shares to any Person, other than pursuant to the Arrangement Agreement, or (ii) agree to take any of the foregoing actions.

The Hudbay Support and Voting Agreements automatically terminate upon the earliest to occur of: (a) the Effective Time; (b) the date on which the Arrangement Agreement is terminated in accordance with its terms; (c) the date Hudbay, without consent of the Hudbay Supporting Shareholder, decreases the Consideration payable pursuant to the Arrangement (provided that a decrease in the trading price of the Hudbay Shares will not constitute a decrease in the Consideration) or the terms of the Arrangement Agreement are varied in a manner that is materially adverse to the CMMC Supporting Shareholder; and (d) the Outside Date.

The Hudbay Supporting Shareholders and the CMMC Supporting Shareholders are bound under the Hudbay Support and Voting Agreements and CMMC Support and Voting Agreements, respectively, solely in their capacity as securityholders. Nothing in the Hudbay Support and Voting Agreements and the CMMC Support and Voting Agreements limit or restrict any actions of the Hudbay Supporting Shareholders and CMMC Supporting Shareholders, respectively, from any actions taken by them in their capacity as a director and/or officer of Hudbay or CMMC, as applicable, or limit in any way whatsoever the exercise of fiduciary duties as a director or officer of Hudbay or CMMC, as applicable.

The foregoing is a summary of the material terms of the Support and Voting Agreements and is subject to, and qualified in its entirety by, the full text of the Support and Voting Agreements, the forms of which have been filed under Hudbay’s and CMMC’s their respective issuer profiles on SEDAR at www.sedar.com and under Hudbay’s issuer profile on EDGAR at www.sec.gov.

 

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Arrangement Mechanics

The following description of the Plan of Arrangement is qualified in its entirety by reference to the full text of the Plan of Arrangement, which is attached as Appendix E to this Circular.

The purpose of the Arrangement is to effect the combination of the businesses of Hudbay and CMMC. Pursuant to the Arrangement Agreement, Hudbay and CMMC have agreed to complete the Arrangement pursuant to which, among other things, Hudbay will acquire all of the issued and outstanding CMMC Shares. Upon completion of the Arrangement, CMMC will be an indirect wholly-owned Subsidiary of Hudbay.

If the Hudbay Resolution is approved at the Hudbay Meeting, the Arrangement Resolution is approved at the CMMC Meeting, the Final Order approving the Arrangement is issued by the Court and the applicable conditions to completion of the Arrangement are satisfied or waived, the Arrangement will take effect commencing and effective as at the Effective Time, which is expected to be at 12:01 a.m. (Vancouver time), but may be such other time as CMMC and Hudbay agree in writing and prior to the Effective Time, on the Effective Date which is expected to occur in late June 2023. Commencing and effective as at the Effective Time, each of the events set out below shall occur and shall be deemed to occur sequentially in the following order, with each such step after the first occurring five minutes after the preceding step (except where otherwise indicated), without any further authorization, act or formality on the part of any Person:

 

1.

Notwithstanding any vesting or exercise or other provisions to which a CMMC Phantom Option might otherwise be subject (whether by contract, the conditions of grant, applicable Law or the terms of the grant agreement), each CMMC Phantom Option will be deemed to be fully vested on the Effective Date and will, without any further action by or on behalf of a holder, be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, and the holder thereof will be entitled to receive in exchange therefor a cash payment from CMMC equal to (A) the aggregate CMMC Phantom Option Value of the holder’s CMMC Phantom Options, less (B) the Applicable Withholdings (which Applicable Withholdings will be remitted to the applicable Governmental Entity on behalf of the holder), whereupon the name of such CMMC Phantom Option holder will be removed from the register of CMMC Phantom Options maintained by Copper Mountain Mine (BC) Ltd., and each CMMC Phantom Option will immediately be cancelled and all agreements relating to the CMMC Phantom Options will be terminated and will be of no further force and effect;

 

2.

Notwithstanding any vesting or exercise or other provisions to which a CMMC Phantom RSU might otherwise be subject (whether by contract, the conditions of grant, applicable Law or the terms of the CMMC Phantom RSU Plan), each CMMC Phantom RSU will be deemed to be fully vested on the Effective Date and will, without any further action by or on behalf of a holder, be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, and the holder thereof will be entitled to receive in exchange therefor a cash payment from CMMC, or a Subsidiary thereof, equal to (A) the aggregate CMMC Phantom RSU Value of the holder’s CMMC Phantom RSUs, less (B) the Applicable Withholdings (which Applicable Withholdings will be remitted to the applicable Governmental Entity on behalf of the holder), whereupon the name of such CMMC Phantom RSU holder will be removed from the register of CMMC Phantom RSUs maintained by Copper Mountain Mine (BC) Ltd., and the CMMC Phantom RSU Plan, and each CMMC Phantom RSU will immediately be cancelled and all agreements relating to the CMMC Phantom RSUs will be terminated and will be of no further force and effect.

 

3.

Notwithstanding any vesting or exercise or other provisions to which a CMMC RSU might otherwise be subject (whether by contract, the conditions of grant, applicable Law or the terms of the CMMC RSU Plan or the CMMC LTIP, as applicable), each CMMC RSU will be deemed to be fully vested on the Effective Date and will, without any further action by or on behalf of a holder, be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, and the holder thereof will be entitled to receive in exchange therefor and CMMC will issue in settlement of the holder’s CMMC RSUs that number of CMMC Shares to which the holder would otherwise be entitled to receive under the CMMC RSU Plan in respect of each CMMC RSU, whereupon the name of such

 

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CMMC RSU holder will be removed from the register of CMMC RSUs maintained by CMMC, and the CMMC RSU Plan, and each CMMC RSU will immediately be cancelled and all agreements relating to the CMMC RSUs will be terminated and will be of no further force and effect, and the holder will be and will be deemed to be the holder of that number of CMMC Shares issued herein.

 

4.

Notwithstanding any vesting or exercise or other provisions to which a CMMC DSU might otherwise be subject (whether by contract, the conditions of grant, applicable Law or the terms of the CMMC DSU Plan), each CMMC DSU will, without any further action by or on behalf of a holder, be deemed to be fully vested on the Effective Date and will be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, and the holder thereof will be entitled to receive in exchange therefor a cash payment from CMMC equal to (A) the aggregate CMMC DSU Value of the holder’s CMMC DSUs, less (B) the Applicable Withholdings (which Applicable Withholdings will be remitted to the applicable Governmental Entity on behalf of the holder), whereupon the name of such CMMC DSU holder will be removed from the register of CMMC DSUs maintained by CMMC, and the CMMC DSU Plan and each CMMC DSU will immediately be cancelled and all agreements relating to the CMMC DSUs will be terminated and will be of no further force and effect.

 

5.

Notwithstanding any vesting or exercise or other provisions to which a CMMC PSU might otherwise be subject (whether by contract, the conditions of grant, applicable Law or the terms of the CMMC PSU Plan or the CMMC LTIP, as applicable), each CMMC PSU will, without any further action by or on behalf of a holder, be deemed to be fully vested on the Effective Date and will be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, the Adjustment Factor or the Performance Multiplier, as applicable, will be deemed to be 100%, and the holder thereof will be entitled to receive in exchange therefor and CMMC will issue in settlement of the holder’s CMMC PSUs that number of CMMC Shares to which the holder would otherwise be entitled to receive under the CMMC PSU Plan in respect of each CMMC PSU, whereupon the name of such CMMC PSU holder will be removed from the register of CMMC PSUs maintained by CMMC, and the CMMC PSU Plan and the CMMC LTIP and each CMMC PSU will immediately be cancelled and all agreements relating to the CMMC PSUs will be terminated and will be of no further force and effect, and the holder will be and will be deemed to be the holder of that number of CMMC Shares issued herein.

 

6.

Each Dissent Share shall be transferred and assigned by the holder thereof without any further act or formality on its part, free and clear of all Liens, to Hudbay in accordance with, and for the consideration contemplated in the Plan of Arrangement, and:

 

  (i)

such Dissenting Shareholder will cease to be the registered holder of each such Dissent Share and the name of such registered holder will be, and will be deemed to be, removed from the register of the CMMC Shareholders in respect of each such Dissent Share, and at such time each Dissenting Shareholder will have only the rights set out in the Plan of Arrangement;

 

  (ii)

such Dissenting Shareholder will be deemed to have executed and delivered all consents, releases, assignments and waivers, statutory or otherwise, required to transfer and assign each such Dissent Share; and

 

  (iii)

Hudbay will be the holder of all of the outstanding Dissent Shares, free and clear of all Liens, and the central securities register of CMMC will be revised accordingly.

 

7.

Each CMMC Shareholder, other than Hudbay and a Dissenting Shareholder but including those holders that were issued CMMC Shares under paragraphs 3 and 5 above, will transfer and assign their CMMC Shares, free and clear of any Liens, to Hudbay in exchange for the Consideration for each such CMMC Share transferred, and in respect of the CMMC Shares transferred:

 

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  (i)

the registered holder thereof will cease to be, and will be deemed to cease to be, the registered holder of each such CMMC Share and the name of such registered holder will be removed from the register of CMMC Shareholders; and

 

  (ii)

the registered holder thereof will be deemed to have executed and delivered all consents, releases, assignments and waivers, statutory or otherwise, required to transfer and assign each such CMMC Share,

and Hudbay will be the holder of all of the outstanding CMMC Shares, free and clear of all Liens, and the central securities register of the CMMC will be revised accordingly.

 

8.

Notwithstanding any vesting or exercise or other provisions to which a CMMC Option might otherwise be subject (whether by contract, the conditions of grant, applicable Law or the terms of the CMMC Option Plan), each CMMC Option outstanding immediately prior to the Effective Time will, without any further action by or on behalf of a holder, be exchanged for a Hudbay Replacement Option exercisable to purchase from Hudbay the number of Hudbay Shares equal to the product of (A) the number of CMMC Shares subject to the CMMC Option immediately before the Effective Time multiplied by (B) the Exchange Ratio (provided that if the foregoing would result in the issuance of a fraction of a Hudbay Share on any particular exercise of Hudbay Replacement Options, then the number of Hudbay Shares otherwise issued will be rounded down to the nearest whole number of Hudbay Shares). The exercise price per Hudbay Share subject to any such Hudbay Replacement Option will be an amount equal to the quotient of (X) the exercise price per CMMC Share underlying the exchanged CMMC Option immediately prior to the Effective Time divided by (Y) the Exchange Ratio (provided that the aggregate exercise price payable on any particular exercise of Hudbay Replacement Options will be rounded up to the nearest whole cent). It is intended that (i) the provisions of subsection 7(1.4) of the Tax Act apply to the aforesaid exchange of options and (ii) such exchange of options be treated as other than the grant of a new stock right or a change in the form of payment pursuant to section 1.409A-1(b)(5)(v)(D) of the U.S. Treasury Regulations. Accordingly, and notwithstanding the foregoing, if required, the exercise price of a Hudbay Replacement Option will be adjusted such that the In-The-Money Value of the Hudbay Replacement Option immediately after the exchange does not exceed the In-The-Money Value of the CMMC Option for which it was exchanged immediately before the exchange. All terms and conditions of a Hudbay Replacement Option, including the term to expiry, conditions to and manner of exercising, will be the same as the CMMC Option for which it was exchanged, and will be governed by the terms of the applicable CMMC Option Plan and any document evidencing a CMMC Option will thereafter evidence and be deemed to evidence such Hudbay Replacement Option.

 

9.

Notwithstanding any vesting or exercise or other provisions to which a Hudbay Replacement Option might otherwise be subject, each Hudbay Replacement Option will be deemed to be fully vested on the Effective Date and, without any further action by or on behalf of a holder of a Hudbay Replacement Option, the holder’s Hudbay Replacement Options will either: (A) if prior to the time of the step contemplated in this paragraph 9 Hudbay has received notice of the exercise of the holder’s Hudbay Replacement Options and the holder has paid the required exercise price to Hudbay, be exercised and the holder will be entitled to receive the Hudbay Shares issuable pursuant to the exercise of such Hudbay Replacement Options; or (B) in any other case, be transferred and assigned by the holder, free and clear of any Liens, to Hudbay and the holder will be entitled to receive in exchange therefor a cash payment from Hudbay equal to (X) the aggregate Hudbay Replacement Option Value of the holder’s Hudbay Replacement Options, less (Y) the Applicable Withholdings (which Applicable Withholdings will be remitted to the applicable Governmental Entity on behalf of the holder); and the name of the holder will be removed from the register of options maintained by Hudbay, and each Hudbay Replacement Option will immediately be cancelled and all agreements relating to the Hudbay Replacement Options will be terminated and will be of no further force and effect.

 

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10.

All of the CMMC Shares held by Hudbay will be transferred and assigned by Hudbay to Hudbay Sub 2 in exchange for 100,000 common shares of Hudbay Sub 2.

 

11.

At 12:01 a.m. on the day following the Effective Date, or such other time as CMMC and Hudbay may agree in writing and prior to the Effective Time, the notice of articles of CMMC will be altered to the extent necessary for CMMC to become an unlimited liability company as contemplated pursuant to Section 51.31(1) of the BCBCA, such that (i) the statement required under Section 51.11 of the BCBCA will be included in the notice of articles of CMMC; and (ii) the name of CMMC will be changed to “Copper Mountain ULC” and CMMC will thereupon be an unlimited liability company under the BCBCA and, as soon as practicable thereafter, Hudbay Sub 2, as sole shareholder of CMMC, will return all share certificates representing CMMC Shares for inclusion on the face of each such certificate the statement required pursuant to Section 51.2 of the BCBCA.

 

12.

Five minutes following the preceding step, Hudbay Sub 1 and the Hudbay Sub 2 will be amalgamated and continue as Amalco and:

 

  (i)

the property, rights and interests of each of Hudbay Sub 1 and Hudbay Sub 2 will continue to be the property, rights and interests of Amalco;

 

  (ii)

Amalco will continue to be liable for the obligations of each of Hudbay Sub 1 and Hudbay Sub 2;

 

  (iii)

existing causes of action, claims or liabilities to prosecution are unaffected;

 

  (iv)

legal proceedings being prosecuted or pending by or against Hudbay Sub 1 or Hudbay Sub 2 may be prosecuted, or their prosecution may be continued, as the case may be, by or against Amalco;

 

  (v)

convictions against, or rulings, orders or judgments in favour of or against, Hudbay Sub 1 or Hudbay Sub 2 may be enforced by or against Amalco;

 

  (vi)

each issued and outstanding common share of Hudbay Sub 2 immediately prior to the amalgamation will be cancelled on the amalgamation without any repayment of capital in respect thereof;

 

  (vii)

Amalco’s authorized share structure will be the same as that of Hudbay Sub 1 immediately prior to the amalgamation, being an unlimited number of common shares without par value having the same special rights and restrictions, if any, as those attached to Hudbay Sub 1’s common shares immediately prior to the amalgamation (the “Amalco Common Shares”);

 

  (viii)

any issued and outstanding common shares in the capital of Hudbay Sub 1 immediately prior to the amalgamation will survive and continue as Amalco Common Shares without amendment;

 

  (ix)

no securities will be issued and no assets will be distributed by Amalco in connection with the amalgamation;

 

  (x)

the name of Amalco will be Hudbay British Columbia Inc.;

 

  (xi)

the registered and records office of Amalco will be Suite 1600, Cathedral Place, 925 West Georgia Street, Vancouver, British Columbia V6C 3L2;

 

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  (xii)

in accordance with subsection 282(1)(b)(iii) of the BCBCA, the notice of articles of Amalco will be the same as the notice of articles of Hudbay Sub 1 immediately prior to the amalgamation of Hudbay Sub 1 and Hudbay Sub 2;

 

  (xiii)

in accordance with subsection 282(1)(c)(iv) of the BCBCA, the articles of Amalco will be the same as the articles of Hudbay Sub 1 immediately prior to the amalgamation of Hudbay Sub 1 and the Hudbay Sub 2;

 

  (xiv)

the board of directors of Amalco will consist of three directors, until changed in accordance with the BCBCA and the articles of Amalco. The first directors of Amalco will be Peter Kukielski, Patrick Donnelly and Eugene Lei;

 

  (xv)

the first officers of Amalco will be Peter Kukielski (President and CEO), Patrick Donnelly (SVP, Legal and Organizational Effectiveness), Eugene Lei (CFO) and Mark Haber (Executive Director, Legal and Corporate Secretary).

All Hudbay Shares issued pursuant to the Arrangement will be, and will be deemed to be, validly issued and outstanding as fully paid and non-assessable shares.

Timing for Completion of the Arrangement

Subject to the provisions of the Arrangement Agreement, the Arrangement will become effective as of the Effective Time, being 12:01 a.m. (Vancouver time) or such other time as CMMC and Hudbay may agree in writing and prior to the Effective Time, on the Effective Date, being the date that is three business days following the date on which all of the conditions to completion of the Arrangement as set out in the Arrangement Agreement (excluding any conditions that, by their terms, cannot be satisfied until the Effective Date, but subject to the satisfaction or waiver of those conditions) have been satisfied or waived in accordance with the Arrangement Agreement.

If the Hudbay Meeting and the CMMC Meeting are held as scheduled and are not adjourned and/or postponed, the Hudbay Shareholder Approval is obtained and the CMMC Shareholder Approval is obtained, it is expected that CMMC will apply for the Final Order approving the Arrangement on June 15, 2023. If the Final Order is obtained in a form and substance satisfactory to Hudbay and CMMC, and all other conditions set forth in the Arrangement Agreement are satisfied or waived by the applicable Party, Hudbay and CMMC expect the Effective Date to occur in late June 2023, following the receipt of all required Regulatory Approvals. However, it is not possible at this time to state with certainty when the Effective Date will occur as completion of the Arrangement may be delayed beyond this time if the conditions to completion of the Arrangement cannot be met on a timely basis.

Although Hudbay’s and CMMC’s objective is to have the Effective Date occur as soon as possible after the Hudbay Meeting and the CMMC Meeting, the Effective Date could be delayed for a number of reasons, including, but not limited to, an objection before the Court at the hearing of the application for the Final Order or any delay in obtaining any required Regulatory Approvals that remain outstanding. Hudbay or CMMC may determine not to complete the Arrangement without prior notice to or action on the part of Hudbay Shareholders or CMMC Shareholders. See “The Arrangement Agreement – Termination of the Arrangement Agreement”.

Procedure for Exchange of CMMC Shares for Hudbay Shares and Letter of Transmittal

Hudbay and CMMC have appointed Computershare Investor Services Inc. to act as Depositary to handle the exchange of the CMMC Shares for the Consideration. Following receipt of the Final Order and no later than the business day prior to the Effective Date, Hudbay is required to deposit in escrow, or cause to be deposited in escrow, with the Depositary sufficient Hudbay Shares and cash to satisfy (i) the Consideration payable to the CMMC Shareholders (other than Dissenting Shareholders), (ii) Hudbay Shares issuable in connection with any Hudbay Replacement Options in respect of which an election has been made, and (iii) cash payable in connection with any Hudbay Replacement Options, in each case, in accordance with the Plan of Arrangement, which will be held by the Depositary as agent and nominee for such former CMMC Shareholders and CMMC Option holders in accordance with the Plan of Arrangement.

 

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For each Registered CMMC Shareholder, accompanying this Circular is a Letter of Transmittal. CMMC has enclosed an envelope with the CMMC Meeting Materials in order to assist CMMC Shareholders with returning Letters of Transmittal and related documents to the Depositary. Holders of CMMC CDIs will not be provided with, and will not need to submit, a Letter of Transmittal. The Letter of Transmittal will also be available under CMMC’s issuer profile on SEDAR at www.sedar.com. Additional copies of the Letter of Transmittal will also be available by contacting Hudbay’s and CMMC’s joint proxy solicitation agent, Kingsdale Advisors.

Hudbay Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-866-581-1571 (toll-free in North America) or 1-416-623-2514 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.HudbayPOA.com.

CMMC Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

In order for a Registered CMMC Shareholder (other than Dissenting Shareholders) to receive the Consideration Shares they are entitled to receive pursuant to the Arrangement, such Registered CMMC Shareholder must deposit the certificate(s) or DRS Advice(s) representing his, her or its CMMC Shares with the Depositary (at the address specified on the last page of the Letter of Transmittal). The Letter of Transmittal, properly completed and duly executed, together with all other documents and instruments referred to in the Letter of Transmittal or as reasonably required by the Depositary, must accompany all certificate(s) or DRS Advice(s) for CMMC Shares deposited for payment pursuant to the Arrangement. Registered CMMC Shareholders who do not have their certificate(s) representing their CMMC Shares should refer to “The Arrangement – Lost Certificates” below.

The Letter of Transmittal contains procedural information relating to the Arrangement and should be reviewed carefully. In all cases, delivery of the Consideration Shares that a Registered CMMC Shareholder is entitled to receive pursuant to the Arrangement will be made only after timely receipt by the Depositary of a duly completed and signed Letter of Transmittal, together with certificate(s) or DRS Advice(s) representing such CMMC Shares and such other documents and instruments referred to in the Letter of Transmittal or as the Depositary may reasonably require. The Depositary will requisition from the TSX Trust the Consideration Shares that a Registered CMMC Shareholder is entitled to received pursuant to the Arrangement in accordance with the instructions in the duly completed and signed Letter of Transmittal. Hudbay reserves the right, if it so elects in its absolute discretion, to instruct the Depositary to waive any irregularity contained in any Letter of Transmittal received by the Depositary. As soon as practicable following the later of the Effective Date and the deposit of certificate(s) or DRS Advice(s) representing the CMMC Shares, including the delivery of the duly completed and signed Letter of Transmittal and other corresponding documents required from the CMMC Shareholder, the Depositary will requisition from the TSX Trust the Consideration Shares that a Registered CMMC Shareholder is entitled to receive in accordance with the Plan of Arrangement and the instructions set forth in the Letter of Transmittal. TSX Trust will deliver the Consideration Shares, in accordance with the Depositary’s instructions, as soon as practicable.

Only Registered CMMC Shareholders are required to submit a Letter of Transmittal. The exchange of CMMC Shares for the Consideration Shares in respect of any Non-Registered CMMC Shareholder (other than a holder of CMMC CDIs) is expected to be made with the Non-Registered CMMC Shareholder’s Intermediary account through the procedures in place for such purposes between CDS or DTC and such Intermediary, as applicable, with no further action required by the Non-Registered CMMC Shareholder. Any Non-Registered CMMC Shareholder whose CMMC Shares are registered in the name of an Intermediary should contact that Intermediary if they have any questions regarding this process and to arrange for such Intermediary to complete the necessary steps to ensure that they receive the Consideration in respect of their CMMC Shares.

 

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The method used to deliver a Letter of Transmittal, any accompanying certificate(s) or DRS Advice(s) representing CMMC Shares and any other accompanying documents or instruments, if any, is at the option and risk of the relevant CMMC Shareholder. Delivery will be deemed effective only when such documents are actually received by the Depositary at the address set out in the Letter of Transmittal. CMMC recommends that the necessary documentation be hand delivered to the Depositary and a receipt therefor be obtained; otherwise, the use of registered mail with return receipt requested, properly insured, is recommended.

Under no circumstances will interest accrue on the Consideration Shares that a CMMC Shareholder is entitled to receive upon depositing certificate(s) or DRS Advice(s) representing CMMC Shares pursuant to the Plan of Arrangement, or former holders of CMMC Incentive Awards, regardless of any delay in making such delivery.

From and after the Effective Time, each certificate or DRS Advice that immediately prior to the Effective Time represented one or more CMMC Shares will be deemed to represent only the right to receive in exchange therefor the Consideration Shares the holder of such certificate or DRS Advice, as applicable, is entitled to received in accordance with the Plan of Arrangement, less any amounts withheld pursuant to the Plan of Arrangement.

Procedure for Exchange of CMMC CDIs for Hudbay Shares

Holders of CMMC CDIs are entitled to participate in the Plan of Arrangement. If the Arrangement Resolution is approved and implemented, holders of CMMC CDIs will receive Consideration Shares pursuant to the Plan of Arrangement, regardless of whether or not such holder provided an instruction to vote for or against the Arrangement. Following the Arrangement, the Hudbay Shares will not be listed on the ASX.

Holders of CMMC CDIs will not be provided with, and will not need to submit, a Letter of Transmittal. Pursuant to the Plan of Arrangement, CMMC CDI holders will cease to own CMMC CDIs and will receive in a book-based form the applicable Consideration Shares for each CMMC CDI held with a DRS Advice sent to their registered address. Holders of CMMC CDIs should contact Computershare Australia if they have any questions regarding this process.

Extinction of Rights

Any certificate or DRS Advice which immediately prior to the Effective Time represented outstanding CMMC Shares that were exchanged pursuant to the Plan of Arrangement that is not deposited with all other instruments required by the Plan of Arrangement on or prior to the sixth anniversary of the Effective Date shall cease to represent a claim or interest of any kind or nature as a securityholder of CMMC or Hudbay. On such date, the Consideration Shares, as applicable, to which the former holder of the certificate or DRS Advice referred to in the preceding sentence was ultimately entitled shall be deemed to have been surrendered for no consideration to Hudbay. None of Hudbay, CMMC or the Depositary shall be liable to any person in respect of any Consideration Shares (or dividends, distributions and interest in respect thereof) delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

Accordingly, former CMMC Shareholders who deposit with the Depositary any certificate(s) or DRS Advice(s) representing the CMMC Shares held by such CMMC Shareholder after the sixth anniversary of the Effective Date will not receive the Consideration or any other consideration in exchange therefor and will not own any interest in CMMC, Hudbay or the Combined Company and will not be paid any compensation.

 

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No Fractional Shares

No fractional Hudbay Shares will be issued to CMMC Shareholders (including holders of CMMC CDIs) under the Plan of Arrangement. The number of Hudbay Shares to be received by a CMMC Shareholder will be rounded up to the nearest whole Hudbay Share in the event that a CMMC Shareholder is entitled to a fractional share representing 0.5 or more of a Hudbay Share and will be rounded down to the nearest whole Hudbay Share in the event that a CMMC Shareholder is entitled to a fractional share representing less than 0.5 of a Hudbay Share.

Lost Certificates

In the event that any certificate which immediately prior to the Effective Time represented one or more outstanding CMMC Shares, which were exchanged in accordance with the Plan of Arrangement is lost, stolen or destroyed, upon the making of an affidavit of that fact by the holder claiming such certificate to be lost, stolen or destroyed, the Depositary will requisition TSX Trust to deliver in exchange for such lost, stolen or destroyed certificate, the aggregate Consideration which such holder is entitled to receive in accordance with the Plan of Arrangement. When authorizing such delivery of the aggregate Consideration which such holder is entitled to receive in exchange for such lost, stolen or destroyed certificate, the holder to whom the Consideration is to be delivered must, as a condition precedent to the delivery of such Consideration, give a bond satisfactory to Hudbay and the Depositary in such amount as Hudbay and the Depositary may direct, or otherwise indemnify Hudbay, CMMC and the Depositary and/or any of their respective representatives or agents in a manner satisfactory to Hudbay and the Depositary, against any claim that may be made against Hudbay, CMMC or the Depositary and/or any of their respective representatives or agents with respect to the certificate alleged to have been lost, stolen or destroyed and must otherwise take such actions as may be required by the articles of CMMC.

Mail Service Interruptions

Notwithstanding the provisions of the Arrangement, the Circular and the Letter of Transmittal, DRS Advice(s) representing the Consideration Shares and any certificate(s) or DRS Advice(s) representing CMMC Shares to be returned, if applicable, will not be mailed if Hudbay determines that delivery thereof by mail may be delayed.

Persons entitled to DRS Advice(s), cheques and other relevant documents which are not mailed for the foregoing reason may take delivery thereof at the office of the Depositary at which the Letter of Transmittal related thereto was deposited until such time as Hudbay has determined that delivery by mail will no longer be delayed.

Notwithstanding the foregoing section, DRS Advice(s), cheques and other relevant documents not mailed for the foregoing reason will be conclusively delivered on the first day upon which they are available for delivery at the office of the Depositary at which the CMMC Shares were deposited.

Withholding Rights

Hudbay, CMMC, the Depositary, their respective Subsidiaries and any Person on their behalf, will be entitled to deduct and withhold from any amounts payable to any Person pursuant to the Arrangement or under the Plan of Arrangement (including without limitation, any amounts payable pursuant to the Plan of Arrangement), and from all dividends, interest, and other amounts payable or distributable to former CMMC Shareholders, or holders of rights under any CMMC Incentive Awards, such amounts as Hudbay, CMMC, the Depositary, their respective Subsidiaries, or any Person on behalf of any of the foregoing, is or may be required or permitted to deduct or withhold with respect to such payment under the Tax Act, the United States Internal Revenue Code of 1986, or any provision of local, state, federal, provincial or foreign Law, in each case, as amended, or under the administrative practice of the relevant Governmental Entity administering such Law, and to request from any recipient of any payment hereunder any necessary tax forms or any other proof of exemption from withholding or any similar information. To the extent that

 

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amounts are so deducted or withheld, such deducted or withheld amounts will be treated for all purposes hereof as having been paid to the Person to whom such amounts would otherwise have been paid, provided that such deducted or withheld amounts are properly reported and actually remitted to the applicable Governmental Entity. In any case where the amount so required or permitted to be deducted or withheld from any payment to a holder exceeds the cash portion of the consideration otherwise payable, Hudbay, CMMC, the Depositary, their respective Subsidiaries, and any Person on behalf of the foregoing, as the case may be, is authorized to sell or otherwise dispose of such portion of the Consideration (or other entitlements hereunder) as is necessary in order to fully fund such liability, and such Person will remit any unapplied balance of the net proceeds of such sale to the holder. For greater certainty and without limiting the generality of the foregoing, in order to fund any Applicable Withholdings in respect of the transactions described in paragraphs 3 and 4 of “The ArrangementArrangement Mechanics” above, Hudbay is permitted to withhold from the Hudbay Shares that are issued to the former holders of CMMC RSUs and CMMC PSUs under the Plan of Arrangement, or to arrange for such withholding (including through the Depositary), and to sell such Hudbay Shares, or arrange for such Hudbay Shares to be sold, on behalf of such former holders, for cash proceeds that will be used to satisfy such Applicable Withholdings. Any cash proceeds that remain after satisfying such Applicable Withholdings shall be delivered to such former holders.

Treatment of Dividends

No dividends or other distributions declared or made after the Effective Time with respect to Consideration Shares with a record date after the Effective Time will be paid to the holder of any unsurrendered certificate which immediately prior to the Effective Time represented outstanding CMMC Shares that were exchanged for Consideration Shares pursuant to paragraph 7 of “The ArrangementArrangement Mechanics” above, until the holder of such certificate surrenders such certificate in accordance with the Plan of Arrangement. Subject to applicable law, at the time of such surrender of any such certificate (or, in the case of clause (ii) below, at the appropriate payment date), there will be paid to the holder of the certificates representing CMMC Shares that were exchanged for Consideration Shares pursuant to paragraph 7 of “The ArrangementArrangement Mechanics” above, without interest, (a) the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to the Consideration Shares to which such holder is entitled pursuant hereto, and (b) to the extent not paid under clause (a), on the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and the payment date subsequent to surrender payable with respect to such Consideration Shares.

Adjustment of Consideration

If (a) CMMC sets a record date for any dividend or other distribution on the CMMC Shares that is prior to the Effective Date, then the Consideration to be paid per CMMC Share will be reduced to provide to CMMC Shareholders, as applicable, the same economic effect as contemplated by the Arrangement Agreement on the date hereof and the Arrangement prior to such action and as so adjusted will, from and after the date of such event, be the applicable Consideration to be paid per CMMC Share; or (b) Hudbay sets a record date for any dividend or other distribution on the Hudbay Shares in excess of the Permitted Dividend that is prior to the Effective Date, then the Consideration to be paid per CMMC Share will be increased to provide to CMMC Shareholders, as applicable, the same economic effect as contemplated by the Arrangement Agreement on the date hereof and the Arrangement prior to such action and as so adjusted will, from and after the date of such event, be the applicable Consideration to be paid per CMMC Share.

Return of CMMC Shares

If the Arrangement is not completed, any certificate(s) or DRS Advice(s) representing deposited CMMC Shares will be returned to the depositing CMMC Shareholder upon written notice to the Depositary from Hudbay and CMMC by returning the certificate(s) or DRS Advice(s) representing deposited CMMC Shares (and any other relevant documents) by first class insured mail in the name of and to the address specified by the CMMC Shareholder in the Letter of Transmittal or, if such name and address is not so specified, in such name and to such address as shown on the register of CMMC Shares maintained by Computershare on behalf of CMMC.

 

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Expenses

Except as otherwise provided in the Arrangement Agreement, all out-of-pocket third party transaction expenses incurred in connection with the Arrangement Agreement and the transaction contemplated thereby, will be paid by the party incurring such expenses.

The estimated fees, costs and expenses to be incurred by Hudbay with respect to the Arrangement and related matters including, without limitation, financial advisors’ fees, filing fees, special committee, legal, accounting and other administrative and professional fees, proxy solicitation and public relations fees, the costs of preparing, printing and mailing this Circular and other related documents and run-off insurance, but excluding payments made by Hudbay pursuant to the Arrangement, are anticipated to be approximately C$7.5 million, based on certain assumptions.

The estimated fees, costs and expenses to be incurred by CMMC with respect to the Arrangement and related matters including, without limitation, financial advisors’ fees, filing fees, special committee, legal, accounting and other administrative and professional fees, proxy solicitation and public relations fees, the costs of preparing, printing and mailing this Circular and other related documents and run-off insurance, but excluding payments made by CMMC pursuant to the Arrangement, are anticipated to be approximately C$12.5 million, based on certain assumptions.

Shareholder Approvals

Hudbay Shareholder Approval

Each Hudbay Shareholder of record at the close of business (Toronto time) on the Hudbay Record Date will be entitled to vote on the Hudbay Resolution. At the Hudbay Meeting, Hudbay Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, the Hudbay Resolution authorizing the issuance of Hudbay Shares in connection with the Arrangement, the full text of which is set out in Appendix A. The Hudbay Resolution is required pursuant to section 611 of the TSX Company Manual, as the number of Hudbay Shares to be issued to CMMC Shareholders pursuant to the Arrangement exceeds 25% of the number of Hudbay Shares issued and outstanding. In order to become effective, the Hudbay Resolution must be approved by at least a simple majority of the votes cast by Hudbay Shareholders present virtually or represented by proxy at the Hudbay Meeting.

Should Hudbay Shareholders fail to approve the Hudbay Resolution by the requisite majority, the Arrangement will not be completed.

It is the intention of the Persons named in the instrument of proxy enclosed with the Hudbay Meeting Materials, if not expressly directed to the contrary in such instrument of proxy, to vote such proxy in favour of the Hudbay Resolution.

CMMC Shareholder Approval

At the CMMC Meeting, pursuant to the Interim Order, CMMC Shareholders will be asked to approve the Arrangement Resolution. Each CMMC Shareholder of record at the close of business (Vancouver time) on the CMMC Record Date shall be entitled to vote on the Arrangement Resolution.

At the CMMC Meeting, CMMC Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, the Arrangement Resolution authorizing the Arrangement, the full text of which is set out in Appendix B. In order to become effective, the Arrangement Resolution must be approved by (a) at least two-thirds of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, and (b) a simple majority of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, excluding the votes required to be excluded by MI 61-101, as described under “Securities Law Matters – Interests of Certain Persons in the ArrangementMultilateral Instrument 61-101”.

 

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Should CMMC Shareholders fail to approve the Arrangement Resolution by the requisite majorities, the Arrangement will not be completed.

It is the intention of the Persons named in the instrument of proxy enclosed with the CMMC Meeting Materials, if not expressly directed to the contrary in such instrument of proxy, to vote such proxy in favour of the Arrangement Resolution.

Court Approval of the Arrangement

The Arrangement requires approval by the Court under Part 9, Division 5 of the BCBCA. Prior to mailing this Circular, CMMC (a) obtained the Interim Order providing for the calling and holding of the CMMC Meeting, the Dissent Rights and other procedural matters, and (b) filed the Notice of Hearing of Petition for the Final Order to approve the Arrangement. Copies of the Interim Order and the Notice of Hearing of Petition for the Final Order are attached as Appendix C and Appendix D, respectively, to this Circular.

The Court hearing in respect of the Final Order is expected to take place on or about June 15, 2023 at 9:45 a.m. (Vancouver time), or as soon reasonably practical thereafter and in the manner directed by the Court, at 800 Smithe Street, Vancouver, British Columbia, subject to receipt of the CMMC Shareholder Approval and the Hudbay Shareholder Approval.

At the Final Order hearing, the Court will consider, among other things, the fairness and reasonableness of the terms and conditions of the Arrangement and the rights and interests of every person affected. The Court may approve the Arrangement in any manner the Court may direct, subject to compliance with such terms and conditions, if any, as the Court deems fit. There can be no assurance that the Court will approve the Arrangement. Prior to the Final Order hearing, the Court will be informed that CMMC and Hudbay intend to rely on the exemption from the registration requirements under Section 3(a)(10) of the U.S. Securities Act for the issuance of Hudbay Shares issuable to CMMC Shareholders and CMMC CDI holders in exchange for their CMMC Shares and CMMC CDIs, respectively, and the issuance of Hudbay Replacement Options to holders of CMMC Options in exchange for their CMMC Options, pursuant to the Arrangement upon completion of the Arrangement.

Under the terms of the Interim Order, any holder of CMMC Shares and any other interested person will have the right to appear at the hearing and make submissions at the Hearing of Petition for the Final Order subject to such party filing with the Court and serving upon CMMC and upon counsel to CMMC, in each case at the address set out below, a Response to Petition in the form required by the rules of the Court, and any additional affidavits or other materials on which a party intends to rely in connection with any submissions at such hearing, including such party’s address for service, as soon as reasonably practicable, and, in any event, not later than 4:00 p.m. (Vancouver time) on June 12, 2023. The Response to Petition and supporting materials must be delivered, within the time specified, to CMMC’s counsel at the following addresses: Farris LLP, 700 West Georgia Street, 25th Floor, Vancouver, British Columbia, V7Y 1B3, Attention: Tevia Jeffries and Davies Ward Phillips & Vineberg LLP, 155 Wellington Street West, 40th Floor, Toronto, ON, M5V 3J7, Attention: Derek Ricci. If the Final Order hearing is postponed, adjourned or rescheduled, then, subject to further direction of the Court, only those persons having previously served and filed a Response to Petition in compliance with the Final Order will be given notice of the new date.

Key Regulatory Matters

To the best of the knowledge of the Parties, other than those which have already been made or received, there are no filings, consents, waiting periods or approvals required to be made with, applicable to, or required to be received from any Governmental Entity prior to the Effective Date in connection with the Arrangement, except for the Court’s granting of the Final Order, which is a condition to the completion of

 

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the Arrangement. It is also a condition to the completion of the Arrangement that the TSX and the NYSE will have conditionally approved or authorized the listing of the Consideration Shares to be issued pursuant to the Arrangement, subject only to customary listing conditions. Hudbay has applied to list the Consideration Shares to be issued in connection with the Arrangement (including Hudbay Shares to be issued on the exercise of the Hudbay Replacement Options and the vesting of the certain other CMMC Incentive Awards following completion of the Arrangement) on the TSX and the NYSE and has received conditional approval for such listing from the TSX. Final approval of the TSX is conditional on the satisfaction by Hudbay of customary conditions to listing imposed by the TSX. Hudbay anticipates receiving all required authorizations from the NYSE prior to the closing of the Arrangement. See “The Arrangement – Stock Exchange Listing Approval and Delisting Matters”. If any additional filings or consents are required, such filings or consents will be sought but these additional requirements could delay the Effective Date or prevent the completion of the Arrangement.

Competition Act Approval

Part IX of the Competition Act (Canada) (“Competition Act”) and the regulations promulgated thereunder, as amended, require that the parties to certain classes of transactions provide prescribed information to the Commissioner of Competition (“Commissioner”) where the applicable thresholds set out in sections 109 and 110 of the Competition Act are exceeded and no exemption applies (“Notifiable Transactions”). Subject to certain limited exemptions, a Notifiable Transaction cannot be completed until the parties to the transaction have each submitted prescribed information to the Commissioner (a “Notification”) and the applicable waiting period has expired, or been waived or terminated by the Commissioner.

The Arrangement constitutes a Notifiable Transaction, and as such, the Parties must comply with the merger notification provisions of Part IX of the Competition Act.

The waiting period expires 30 days after the day on which the parties to the Notifiable Transaction have submitted their respective prescribed information unless the Commissioner notifies the parties that additional information is required (a “Supplementary Information Request”). If the Commissioner provides the parties with a Supplementary Information Request, the Notifiable Transaction cannot be completed until 30 days after compliance with such Supplementary Information Request. Where a transaction is not completed within one year of the parties providing the required notice and information or such longer period as the Commissioner may specify, Part IX of the Competition Act may apply as if no notice were given or information supplied.

Alternatively, or in addition to filing a Notification, the parties to a Notifiable Transaction may apply to the Commissioner for an advance ruling certificate under subsection 102(1) of the Competition Act (an “ARC”) confirming that the Commissioner is satisfied that he or she does not have sufficient grounds on which to apply to the Competition Tribunal for an order under section 92 of the Competition Act to prohibit the completion of the transaction or, as an alternative to an ARC, for a waiver of the requirement to file a Notification and written confirmation that the Commissioner does not, at that time, intend to make an application to the Competition Tribunal under section 92 of the Competition Act in respect of the transaction

(a “No Action Letter”).

Whether or not a merger is subject to notification under Part IX of the Competition Act, if no ARC has been issued in respect of the merger, the Commissioner can apply to the Competition Tribunal for an order under section 92 of the Competition Act at any time before the merger has been completed or, if completed, within one year after it was substantially completed. On application by the Commissioner under section 92 of the Competition Act, the Competition Tribunal may, where it finds that the merger prevents or lessens, or is likely to prevent or lessen, competition substantially, order that the merger not proceed, prohibit conduct necessary to ensure that the merger does not prevent or lessen competition substantially or, if completed, order its dissolution or the disposition of designated assets or shares; in addition to, or in lieu thereof, with the consent of the Person against whom the order is directed and the Commissioner, the Competition Tribunal may order a Person to take any other action.

 

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Pursuant to the Arrangement Agreement, on April 24, 2023, the Parties submitted Notifications to the Commissioner and Hudbay submitted a request that the Commissioner issue an ARC or a No Action Letter in respect of the transactions contemplated by the Arrangement. On May 8, 2023, the Commissioner issued an ARC.

The issuance of an ARC satisfies the Competition Act Approval condition of the Arrangement.

Stock Exchange Listing Approval and Delisting Matters

Hudbay is a reporting issuer under Canadian Securities Laws in each of the provinces and territories of Canada and is a foreign private issuer under U.S. Securities Laws. The Hudbay Shares are listed and posted for trading on each of the TSX and the NYSE under the symbol “HBM”.

The closing price of the Hudbay Shares on April 12, 2023, the last full trading day on the TSX and the NYSE before the public announcement of the proposed Arrangement was C$7.00 and $5.19 on the TSX and the NYSE, respectively. The closing price of the Hudbay Shares on May 12, 2023, the last full trading day on the TSX and the NYSE before the date of this Circular was C$6.30 and $4.66 on the TSX and the NYSE, respectively.

CMMC is a reporting issuer under Canadian Securities Laws in each of the provinces of Canada, other than Quebec. The CMMC Shares are listed and posted for trading on the TSX under the symbol “CMMC”, and via CMMC CDIs on the ASX under the symbol “C6C”.

The closing price of the CMMC Shares on April 12, 2023, the last full trading day on the TSX before the public announcement of the proposed Arrangement was C$2.26, and the closing price of the CMMC CDIs on April 13, 2023, the last full trading day on the ASX before the public announcement of the proposed Arrangement, was A$2.44. The closing price of the CMMC Shares on May 12, 2023, the last full trading day on the TSX before the date of this Circular was C$2.41, and the closing price of the CMMC CDIs on May 12, 2023, the last full trading day on the ASX before the date of this Circular was A$2.56.

It is a mutual condition to the completion of the Arrangement that the TSX and the NYSE will have conditionally approved or authorized the listing of the Consideration Shares to be issued pursuant to the Arrangement, subject only to customary listing conditions. Hudbay has applied to list the Consideration Shares to be issued in connection with the Arrangement (including Hudbay Shares to be issued on the exercise of the Hudbay Replacement Options and the vesting of the certain other CMMC Incentive Awards following completion of the Arrangement) on the TSX and the NYSE and has received conditional approval for such listing from the TSX. Final approval of the TSX is conditional on the satisfaction by Hudbay of customary conditions to listing imposed by the TSX. Hudbay anticipates receiving all required authorizations from the NYSE prior to the closing of the Arrangement.

Details of the settlement timetable for the CMMC CDIs are in the process of being confirmed with the ASX. It is anticipated that after the necessary shareholder and court approvals are obtained and closing of the Arrangement is ready to be initiated, trading in CMMC CDIs will go into voluntary suspension for a period of approximately three trading days in anticipation of the closing of the Arrangement. During that time, the ability to transmute CMMC CDIs into the underlying CMMC Shares, and vice versa, is expected to be restricted.

Following completion of the Arrangement, the Hudbay Shares will continue to be listed and posted for trading on the TSX and the NYSE under the symbol “HBM”. Unlike the CMMC Shares, the Hudbay Shares are not, and after completion of the Arrangement will not be, listed on the ASX. It is expected that the CMMC Shares and CMMC CDIs, as applicable, will be de-listed from the TSX and the ASX after the Effective Date. Subject to applicable Laws, Hudbay will, as promptly as possible following completion of the Arrangement, apply to the applicable securities commissions or similar authorities in Canada to have CMMC cease to be a reporting issuer.

 

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THE ARRANGEMENT AGREEMENT

The following is a summary of the material terms of the Arrangement Agreement and the Plan of Arrangement and is subject to, and qualified in its entirety by, the full text of the Arrangement Agreement, which have been filed under Hudbay’s and CMMC’s respective issuer profiles on SEDAR at www.sedar.com and under Hudbay’s profile on EDGAR at www.sec.gov, and by the Plan of Arrangement, which is attached to this Circular as Appendix E. Shareholders are urged to read the Arrangement Agreement and the Plan of Arrangement in their entirety.

On April 13, 2023, Hudbay and CMMC entered into the Arrangement Agreement pursuant to which Hudbay agreed to acquire, through the Arrangement, all of the issued and outstanding CMMC Shares from CMMC Shareholders for consideration per CMMC Share equal to 0.381 of a Hudbay Share.

The Arrangement is being effected pursuant to the Arrangement Agreement which provides for the implementation of the Plan of Arrangement on the Effective Date. The Arrangement Agreement contains covenants and representations and warranties of and from each of Hudbay and CMMC and various conditions precedent, both mutual and in favour of Hudbay and CMMC individually.

Conditions to Closing

Mutual Conditions Precedent

The completion of the Arrangement is subject to satisfaction of the following conditions precedent which may only be waived with the mutual consent of Hudbay and CMMC:

 

   

Arrangement Resolution Approval. The Arrangement Resolution shall have been approved and adopted by the CMMC Shareholders at the CMMC Meeting in accordance with the Interim Order.

 

   

Interim and Final Order. The Interim Order and the Final Order shall each have been obtained on terms consistent with the Arrangement Agreement, and shall not have been set aside or modified in a manner unacceptable to either CMMC or Hudbay, each acting reasonably, on appeal or otherwise.

 

   

Hudbay Resolution Approval. The Hudbay Resolution shall have been approved and adopted by the Hudbay Shareholders at the Hudbay Meeting.

 

   

Illegality. No Law is in effect that makes the consummation of the Arrangement illegal or otherwise prohibits or enjoins CMMC or Hudbay from consummating the Arrangement.

 

   

Exempt from U.S. Securities Act. (a) The Consideration Shares and Hudbay Replacement Options to be issued pursuant to the Arrangement shall be exempt from the registration requirements of the U.S. Securities Act pursuant to section 3(a)(10) thereof and (b) such Consideration Shares and Hudbay Replacement Options shall not be “restricted securities” within the meaning of Rule 144 under the U.S. Securities Act and subject only to restrictions on transfer applicable solely as a result of the holder being, or within the last 90 days having been, an affiliate (as defined in Rule 144 under the U.S. Securities Act) of Hudbay or except as disclosed in this Circular.

 

   

Exempt from Prospectus or Registration Requirements. The distribution of the Consideration Shares and Hudbay Replacement Options shall be exempt from the prospectus and registration requirements of applicable Canadian Securities Laws either by virtue of exemptive relief from the securities regulatory authorities of each of the provinces and territories of Canada or by virtue of applicable exemptions under Canadian Securities Laws and shall not be subject to resale restrictions under applicable Canadian Securities Laws.

 

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Listing of Consideration Shares. The Consideration Shares to be issued pursuant to the Arrangement shall have been approved for listing on the NYSE (subject only to official notice of issuance) and the TSX (subject only to customary conditions).

 

   

Competition Act Approval. The Competition Act Approval shall have been obtained and such Competition Act Approval shall be in force and shall not have been modified or rescinded.

Conditions in Favour of Hudbay

The obligation of Hudbay to complete the Arrangement is subject to the fulfillment of each of the following conditions precedent on or before the Effective Time (each of which is for the exclusive benefit of Hudbay and may be waived by Hudbay, in whole or in part, at any time):

 

   

Performance of Covenants. All covenants of CMMC under the Arrangement Agreement to be performed on or before the Effective Time shall have been duly performed by CMMC in all material respects and Hudbay shall have received a certificate of CMMC addressed to Hudbay and dated the Effective Date, signed on behalf of CMMC by two senior executive officers of CMMC (on CMMC’s behalf and without personal liability), confirming the same as of the Effective Date.

 

   

Representations and Warranties. (a) the representations and warranties of the CMMC set forth in the Arrangement Agreement (other than as contemplated in clauses (b) and (c)) shall be true and correct in all respects, without regard to any materiality or CMMC Material Adverse Effect qualifications contained in them, as of the date of the Arrangement Agreement and as of the Effective Time as though made on and as of such date or time (except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of that specified date), except where the failure or failures of all such representations and warranties to be so true and correct in all respects would not reasonably be expected to have a CMMC Material Adverse Effect; (b) the representations and warranties of CMMC relating to organization and qualification, authority relative to the Arrangement Agreement, no conflict and absence of a CMMC Material Adverse Effect shall be true and correct in all respects as of the date of the Arrangement Agreement and as of the Effective Time as though made on and as of such date or time, and (c) the representations and warranties of the CMMC relating to subsidiaries, capitalization and listing and brokers shall be true and correct in all respects (except for de minimis inaccuracies and as a result of transactions, changes, conditions, events or circumstances permitted under the Arrangement Agreement) as of the date of the Arrangement Agreement and as of the Effective Time as though made on and as of such date or time (except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of that specified date), and Hudbay shall have received a certificate of CMMC addressed to Hudbay and dated the Effective Date, signed on behalf of CMMC by two senior executive officers of CMMC (on the CMMC’s behalf and without personal liability), confirming the same.

 

   

No Material Adverse Effect. Between the date of the Arrangement Agreement and the Effective Time, there shall not have occurred a CMMC Material Adverse Effect.

 

   

No Proceedings. There shall not be pending or threatened in writing any suit, action or proceeding by any Governmental Entity in Canada that is reasonably likely to result in a prohibition or restriction on the acquisition by Hudbay of any CMMC Shares, or any restriction or prohibition of the consummation of the transactions contemplated by the Arrangement.

 

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Dissent Rights. Dissent Rights shall not have been exercised (or, if exercised, not withdrawn) with respect to more than 10% of the issued and outstanding CMMC Shares.

Conditions in Favour of CMMC

The obligation of CMMC to complete the Arrangement is subject to the fulfillment of each of the following conditions precedent on or before the Effective Time (each of which is for the exclusive benefit of CMMC and may be waived by CMMC, in whole or in part, at any time):

 

   

Performance of Covenants. All covenants of Hudbay under the Arrangement Agreement to be performed on or before the Effective Time shall have been duly performed by Hudbay in all material respects and CMMC shall have received a certificate of Hudbay, addressed to CMMC and dated the Effective Date, signed on behalf of Hudbay by two of its senior executive officers (on Hudbay’s behalf and without personal liability), confirming the same as of the Effective Date.

 

   

Representations and Warranties. (a) the representations and warranties of Hudbay set forth in the Arrangement Agreement (other than as contemplated in clauses (b) and (c)) shall be true and correct in all respects, without regard to any materiality or Hudbay Material Adverse Effect qualifications contained in them, as of the date of the Arrangement Agreement and as of the Effective Time as though made on and as of such date or time (except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of that specified date), except where the failure or failures of all such representations and warranties to be so true and correct in all respects would not reasonably be expected to have a Hudbay Material Adverse Effect; (b) the representations and warranties of Hudbay related to organization and qualification, authority relative to the Arrangement Agreement, no conflict, and absence of a Hudbay Material Adverse Effect shall be true and correct in all respects as of the date of the Arrangement Agreement and as of the Effective Time as though made on and as of such date or time, and (c) the representations and warranties of Hudbay relating to subsidiaries, capitalization and listing and brokers shall be true and correct in all respects (except for de minimis inaccuracies and as a result of transactions, changes, conditions, events or circumstances permitted hereunder) as of the date of the Arrangement Agreement and as of the Effective Time as though made on and as of such date or time (except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of that specified date), and CMMC shall have received a certificate of Hudbay addressed to CMMC and dated the Effective Date, signed on behalf of Hudbay by two senior executive officers of Hudbay (on Hudbay’s behalf and without personal liability), confirming the same.

 

   

Payment of Consideration. Hudbay shall have (a) deposited, or caused to be deposited, with the Depositary sufficient Hudbay Shares to satisfy its obligations under the Arrangement Agreement, and the Depositary shall have confirmed to CMMC its receipt of such Hudbay Shares, and (b) advanced the Purchaser Loan to CMMC in accordance with its obligations under the Arrangement Agreement.

 

   

Exempt from Australian Prospectus Requirements. The offer of the Consideration Shares to CMMC Shareholders and Hudbay Replacement Options to holders of CMMC Options resident in Australia shall be compliant with or shall otherwise be exempt from the prospectus requirements of applicable Australian Securities Laws and such Consideration Shares and Hudbay Replacement Options shall not be subject to resale restrictions under applicable Australian Securities Laws.

 

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CMMC Director Nominees’ Appointment. The CMMC Director Nominees shall have been appointed to the Hudbay Board effective as of 11:59 p.m. on the Effective Date.

 

   

No Material Adverse Effect. Between the date of the Arrangement Agreement and the Effective Time, there shall not have occurred a Hudbay Material Adverse Effect.

Effective Date of the Arrangement

If the Hudbay Shareholder Approval and the CMMC Shareholder Approval are obtained, the Final Order is obtained approving the Arrangement, the Competition Act Approval remains in full force and effect, and all other conditions to the Arrangement Agreement are satisfied or waived, the Arrangement will become effective at 12:01 a.m. (Vancouver time), or such other time as CMMC and Hudbay may agree in writing and prior to the Effective Time, on the Effective Date. It is currently expected that the Effective Date will occur in late June 2023.

Outside Date

The Outside Date is August 15, 2023, or such later date as may be agreed to in writing by the Parties.

Representations and Warranties

The Arrangement Agreement contains certain representations and warranties made by each Party to the other Party, in each case of a nature customary for transactions of this type. The representations and warranties were made solely for the purposes of the Arrangement Agreement and, in some cases, are subject to important qualifications, limitations and exceptions agreed to by the Parties in connection with negotiating the Arrangement Agreement. Accordingly, CMMC Shareholders and Hudbay Shareholders should not rely on the representations and warranties as characterizations of the actual state of facts, since they are also modified, in CMMC’s case, by the CMMC Disclosure Letter delivered in connection with the Arrangement Agreement. The CMMC Disclosure Letter contains information that has been included in the respective Party’s general prior public disclosures, as well as potential additional non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the Arrangement Agreement, which subsequent information may or may not be fully reflected in the public record.

The representations and warranties of each of CMMC and Hudbay relate to the following matters: organization and qualification; authority relative to the Arrangement Agreement; no conflict; required filings and consent; subsidiaries; compliance with Laws and constating documents; authorizations; capitalization and listing; shareholder and similar agreements; reporting issuer status; reports; stock exchange matters; financial statements; auditors; no undisclosed liabilities; interest in properties and mineral rights; mineral reserves and resources; scientific and technical information; employment matters; absence of certain changes or events; litigation; intellectual property; indigenous claims; community relations; taxes; insurance; non-arm’s length transactions; environmental; material contracts; whistleblower reporting; restrictions on business activities; brokers; corrupt practices legislation; and sanctions.

In addition to the foregoing representations and warranties, CMMC has provided additional representations and warranties to Hudbay with respect to: personal property; books and records; benefit plans; and standstill agreements, and Hudbay has provided additional representations and warranties to CMMC with respect to: no expropriation; funds available; freely tradeable securities; Australian Securities Laws; use of short form prospectus and the Investment Canada Act.

 

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Covenants

General Conduct of Business and Covenants Relating to the Arrangement

The Arrangement Agreement contains customary negative and affirmative covenants of CMMC and Hudbay. Pursuant to the Arrangement Agreement, each of CMMC and Hudbay has covenanted that it shall and shall cause its Subsidiaries to perform all obligations required to be performed by the Party or any of its Subsidiaries under the Arrangement, cooperate with the other Party in connection with the Arrangement, and do all such other acts and things as may be reasonably necessary or desirable in order to consummate and make effective the transactions contemplated in the Arrangement Agreement, including, among other things: (a) use its commercially reasonable efforts to effect all necessary registrations, filings and submissions of information required by Governmental Entities; (b) defend all lawsuits or other legal, regulatory or other proceedings against the other Party challenging or affecting the Arrangement Agreement or the consummation of the transactions contemplated thereby; (c) use commercially reasonable efforts to satisfy all conditions precedent to the Arrangement Agreement and take all steps set forth in the Interim Order and the Final Order applicable to it and comply promptly with all requirements imposed by Law on it or its Subsidiaries with respect to the Arrangement Agreement or the Arrangement; (d) use its commercially reasonable efforts to carry out all actions necessary to ensure the availability of the exemption from registration under section 3(a)(10) of the U.S. Securities Act and applicable U.S. state securities laws; (e) not take any action, or refrain from taking any commercially reasonable action, or permit any action to be taken or not taken, which is inconsistent with the Arrangement Agreement or which would reasonably be expected to prevent, materially delay or otherwise impede the consummation of the Arrangement or the transactions contemplated by the Arrangement Agreement; and (f) promptly notify the other Party of (i) any Hudbay Material Adverse Effect or CMMC Material Adverse Effect, or any change, effect, event, occurrence or state of facts or circumstance that would reasonably be expected to have, individually or in the aggregate, a Hudbay Material Adverse Effect or CMMC Material Adverse Effect, as applicable, (ii) any notice or other communication from any Person alleging that a consent is required in connection with the Arrangement Agreement or Arrangement, or (iii) any material proceedings commenced or, to the knowledge of Hudbay or CMMC, as applicable, threatened against, relating to or involving or otherwise affecting Hudbay or CMMC or any of their respective Subsidiaries, as applicable, in connection with the Arrangement Agreement or the Arrangement. Hudbay has also covenanted to use commercially reasonable efforts to, prior to the completion of the Arrangement, obtain conditional approval or authorization of the listing and posting for trading on the TSX and the NYSE of the Consideration Shares, subject only to satisfaction of the customary listing conditions of the TSX and the NYSE, as applicable.

The Arrangement Agreement also contains customary covenants of CMMC and Hudbay pertaining to, among other things: (a) the conduct of their respective businesses, including with respect to, among other things, corporate matters, issuing shares or other equity, distributions, dispositions and acquisitions, capital expenditures and indebtedness and in the case of CMMC, employment and compensation arrangements, material contracts, maintenance of insurance policies and taxes; (b) efforts to obtain the Regulatory Approvals; (c) Tax matters; (d) access to information; (e) insurance and indemnification; (f) in the case of Hudbay, blue-sky laws, certain employee matters related to CMMC Employees and (g) in the case of CMMC, the ASX delisting, resignations of all directors of CMMC and its Subsidiaries, as requested by Hudbay, and separation agreements of each member of senior management who will be terminated and the Pre-Acquisition Reorganization.

Covenants Regarding Non-Solicitation and Acquisition Proposals

Non-Solicitation

Except as expressly provided in the Arrangement Agreement, each Party has agreed to not, and to cause each of its Subsidiaries to not, directly or indirectly, through any Representative or otherwise, and to not authorize or permit any such Person to:

 

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solicit, initiate, knowingly encourage or otherwise knowingly facilitate (including by way of furnishing or providing copies of, access to, or disclosure of, any confidential information, properties, facilities, books or records of a Party or any of its Subsidiaries) any inquiry, proposal, or offer that constitutes or may reasonably be expected to constitute or lead to an Acquisition Proposal in respect of such Party;

 

   

engage or participate in any discussions or negotiations with any Person (other than the other Party or its affiliates) in respect of any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to an Acquisition Proposal, provided that either Party may (a) advise any Person of the restrictions of the Arrangement Agreement, (b) clarify the terms of any proposal in order to determine if it may reasonably be expected to result in a Hudbay Superior Proposal or CMMC Superior Proposal, as applicable, and (c) advise any Person making an Acquisition Proposal that the board of directors of such Party has determined that such Acquisition Proposal does not constitute, or is not reasonably expected to result in, a Hudbay Superior Proposal or CMMC Superior Proposal, as applicable;

 

   

make a Change in Recommendation or Hudbay Change in Recommendation, as applicable;

 

   

accept, approve, endorse or recommend, or publicly propose to accept, approve, endorse or recommend, or take no position or remain neutral with respect to, any publicly announced or otherwise publicly disclosed Acquisition Proposal (it being understood that publicly taking no position or a neutral position with respect to a publicly announced, or otherwise publicly disclosed, Acquisition Proposal for a period of no more than five business days following such public announcement or disclosure will not be considered to be in violation of the Arrangement Agreement, provided the Hudbay Board or CMMC has rejected such Acquisition Proposal and affirmed the Hudbay Board Recommendation or CMMC Board Recommendation, as applicable, before the end of such five business day period (or, in the event that the Hudbay Meeting or CMMC Meeting is scheduled to occur within such five business day period, not later than the third business day prior to the date of the Hudbay Meeting or CMMC Meeting, as applicable)); or

 

   

accept or enter into, or publicly propose to accept or enter into, any letter of intent, agreement in principle, agreement, arrangement or understanding relating to any Acquisition Proposal (other than a confidentiality agreement permitted by the Arrangement Agreement).

Each Party has agreed to, and to cause its Subsidiaries and Representatives to, immediately cease and cause to be terminated, any existing solicitation, encouragement, discussion or negotiation with any Person (other than the other Party or its affiliates) with respect to any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to an Acquisition Proposal and, in respect of such Party, and, in connection therewith, such Party has agreed to discontinue access to any of its and its Subsidiaries’ confidential information (and not establish or allow access to any of its confidential information, or any data room, virtual or otherwise, in each case, except as permitted by the Arrangement Agreement) and shall as promptly as reasonably practicable request, and use commercially reasonable efforts to exercise all rights it has (or cause its Subsidiaries to exercise rights that they have) to require the return or destruction of all confidential information regarding the other Party and its Subsidiaries provided in the preceding 12-month period in connection therewith (to the extent such information has not already been returned or destroyed and shall use its commercially reasonable efforts to confirm that such requests are complied with in accordance with the terms of such rights). Such Party shall not, and shall not authorize or permit any of its Subsidiaries to, directly or indirectly, amend, modify or release any third party from any confidentiality, non-solicitation or standstill agreement (or standstill provisions contained in any such agreement) to which such third party is a party (it being understood that the automatic termination or release of any standstill provisions contained in any such agreements as a result of the entering into or announcement of the Arrangement Agreement shall not be a violation of the Arrangement Agreement, or terminate, modify, amend or waive the terms thereof).

 

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Notification of Acquisition Proposals

Each Party has agreed that if it or any of its Subsidiaries or any of their respective Representatives, receives (a) any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to an Acquisition Proposal, or (b) any request for non-public information relating to the Party or any of its Subsidiaries or access to the properties, books or records of the Party or any Subsidiary in connection with any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to an Acquisition Proposal, then such Party shall:

 

   

promptly notify the other Party orally and then as soon as reasonably practicable thereafter (and, in any event, within 24 hours) in writing of such Acquisition Proposal, inquiry, proposal, offer or request; and

 

   

indicate the identity of the Person or group of Persons making such proposal, inquiry or contact and all material terms and conditions thereof; and

 

   

provide a copy of any such Acquisition Proposal, inquiry, proposal, offer or request and copies of all material written communications (and a summary of all substantive discussions) related thereto; and

 

   

keep the other party promptly informed of the status, including any change to the material terms, of any such Acquisition Proposal, inquiry, proposal, offer or request.

Responding to an Acquisition Proposal

Notwithstanding the covenants described under “Non-Solicitation” above, if prior to obtaining, in the case of Hudbay, the approval of the Hudbay Resolution, and in the case of CMMC, the approval of the Arrangement Resolution, such Party receives a bona fide written Acquisition Proposal, such Party may (a) engage in or participate in discussions or negotiations with the Person or group of Persons making such Acquisition Proposal, and (b) provide such Person or group of Persons non-public information relating to the Party or any of its Subsidiaries or access to the properties, books or records of the Party or any Subsidiary, if and only if:

 

   

the board of directors of such Party determines, in good faith after consultation with its financial advisors and outside legal counsel, that such Acquisition Proposal constitutes or could reasonably be expected to constitute or lead to a Hudbay Superior Proposal or CMMC Superior Proposal, as applicable and has provided the other Party with written notice of such determination;

 

   

the Person making such Acquisition Proposal was not restricted from making such Acquisition Proposal pursuant to an existing confidentiality, standstill, non-solicitation or similar agreement with the other Party (it being acknowledged by each Party that the automatic termination or automatic release, in each case pursuant to the terms thereof, of any standstill restrictions of any such agreements as a result of the entering into and announcement of the Arrangement Agreement shall not be a violation of the covenants described in this section);

 

   

such Acquisition Proposal did not result from a breach of the covenants described under “Non-Solicitation” above; and

 

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prior to providing any such copies, access or disclosures, (a) such Party enters into a confidentiality and standstill agreement with such Person, or confirms it has previously entered into such an agreement which remains in effect, in either case on terms not materially less stringent than the Confidentiality Agreement, (b) such Party provides the other Party with a true, complete and final executed copy of such confidentiality agreement, and (c) any such copies, access or disclosure provided to such Person shall have already been or shall concurrently be provided to the other Party.

Superior Proposals and Right to Match

The Parties have agreed that if a Party receives an Acquisition Proposal (the “Receiving Party”) that the board of Directors of the Receiving Party determines in good faith constitutes a Hudbay Superior Proposal or a CMMC Superior Proposal, as applicable, prior, in the case of Hudbay being the Receiving Party, to obtaining the approval of the Hudbay Resolution, or in the case of CMMC being the Receiving Party, to obtaining the approval of the Arrangement Resolution, the Receiving Party may make a Hudbay Change in Recommendation or CMMC Change in Recommendation, as applicable, and/or enter into a definitive agreement (a “Proposed Agreement”) with respect to such CMMC Superior Proposal or Hudbay Superior Proposal, as applicable, if and only if:

 

   

such Acquisition Proposal did not result from a breach of covenants regarding non-solicitation described above in any material respect;

 

   

the Person making such Acquisition Proposal was not restricted from making such Acquisition Proposal pursuant to an existing confidentiality, standstill, non-solicitation or similar agreement with the Receiving Party (it being acknowledged by each Party that the automatic termination or automatic release, in each case pursuant to the terms thereof, of any standstill restrictions of any such agreements as a result of the entering into and announcement of the Arrangement Agreement shall not be a violation of this covenant);

 

   

the Receiving Party has provided the other Party with a notice in writing (a “Superior Proposal Notice”), which notice shall contain (A) the determination of the board of directors of the Receiving Party that such Acquisition Proposal constitutes a Hudbay Superior Proposal or CMMC Superior Proposal, as applicable, (B) the value in financial terms that the board of directors of the Receiving Party has determined should be ascribed to any non-cash consideration offered under such Hudbay Superior Proposal or CMMC Superior Proposal, as applicable, (C) a copy of any Proposed Agreement relating to such Hudbay Superior Proposal or CMMC Superior Proposal, as applicable and (D) copies of any material financing documents provided to the Receiving Party in connection therewith (with customary redactions);

 

   

at least five business days (the “Matching Period”) shall have elapsed from the date that the other Party received the Superior Proposal Notice from the Receiving Party;

 

   

during the Matching Period, the other Party shall have had the opportunity (but not the obligation) to amend the terms of the Arrangement in accordance with the Arrangement Agreement;

 

   

after the Matching Period, the board of directors of the Receiving Party (after receiving advice from its financial advisors and outside legal counsel) has determined in good faith that such Acquisition Proposal continues to constitute a Hudbay Superior Proposal or CMMC Superior Proposal, as applicable, compared to any proposed amendments to the terms of the Arrangement by the other Party; and

 

   

prior to or concurrently with entering into such Proposed Agreement, the Receiving Party shall have terminated the Arrangement Agreement and shall have paid to the other Party the Hudbay Termination Payment or CMMC Termination Payment, as applicable, as described below.

 

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The Parties acknowledge and agree that, during the Matching Period or such longer period as the Receiving Party may approve for such purpose, (a) the other Party shall have the opportunity, but not the obligation, to propose to amend the terms of the Arrangement, (b) the Receiving Party shall negotiate in good faith with the other Party to enable the other Party to make such amendments to the terms of the Arrangement as would enable the Receiving Party to proceed with the Arrangement and any related transactions on such amended terms, and (c) the board of directors of the Receiving Party shall review any proposal by the Receiving Party to amend the terms of the Arrangement in order to determine in good faith whether such proposal would result in the Acquisition Proposal previously constituting a Hudbay Superior Proposal or CMMC Superior Proposal, as applicable, ceasing to constitute a Hudbay Superior Proposal or CMMC Superior Proposal, as applicable, compared to the proposed amendments to the terms of the Arrangement. If the board of directors of the Receiving Party determines that such Acquisition Proposal would cease to constitute a Hudbay Superior Proposal or CMMC Superior Proposal, as applicable, as compared to the proposed amendments to the terms of the Arrangement, the Parties will promptly amend the Arrangement Agreement and the Plan of Arrangement to reflect such proposed amendments.

The board of directors of the Receiving Party shall promptly reaffirm the Hudbay Board Recommendation or CMMC Board Recommendation, as applicable, by press release after: (a) any Acquisition Proposal which the board of directors of the Receiving Party determines not to constitute a Hudbay Superior Proposal or CMMC Superior Proposal, as applicable, is publicly announced; or (b) the board of directors of the Receiving Party determines that a proposed amendment to the terms of the Arrangement as described in the foregoing paragraph would result in any Acquisition Proposal which has been publicly announced no longer constituting a Hudbay Superior Proposal or CMMC Superior Proposal, as applicable. The other Party and its counsel shall be given a reasonable opportunity to review and comment on the form and content of any such press release, recognizing that whether or not such comments are appropriate will be determined by the Receiving Party, acting reasonably.

Nothing in the Arrangement Agreement shall prevent the board of directors of the Receiving Party from (a) responding through a directors’ circular or otherwise, only to the extent required by applicable Securities Laws, to an Acquisition Proposal that it determines is not a Hudbay Superior Proposal or CMMC Superior Proposal, as applicable, (b) making disclosure to the Hudbay Shareholders or CMMC Shareholders, as applicable, if the board of directors of the Receiving Party (after receiving advice from its external financial and legal advisors) shall have determined in good faith that the failure to make such disclosure would be expected to be inconsistent with its fiduciary duties or such disclosure is otherwise required by Law, (c) calling and holding a meeting of Hudbay Shareholders or CMMC Shareholders, as applicable, requisitioned by Hudbay Shareholders or CMMC Shareholders, as applicable, in accordance with the CBCA or BCBCA, as applicable, or (d) calling and holding a meeting of Hudbay Shareholders or CMMC Shareholders, as applicable, ordered to be held by a court in accordance with Law.

Each successive amendment or modification of any Acquisition Proposal that results in an increase in, or modification of, the consideration (or value of such consideration) to be received by the Hudbay Shareholders or CMMC Shareholders, as applicable or other material terms or conditions thereof, shall constitute a new Acquisition Proposal.

The Receiving Party shall ensure that the Representatives retained by the other Party and/or its Subsidiaries in connection with the transactions contemplated by the Arrangement Agreement are aware of the covenants regarding non-solicitation and Acquisition Proposals, and the Receiving Party shall be responsible for any breach of such covenants by such Representatives.

If the Receiving Party provides the other Party with the notice of an Acquisition Proposal on a date that is less than five calendar days prior to the Hudbay Meeting or CMMC Meeting, as applicable, the Receiving Party may (and, if requested by the other Party, the Receiving Party shall) adjourn the Hudbay Meeting or CMMC Meeting, as applicable, to a date that is not less than seven calendar days and not more than 10 calendar days after the date scheduled, provided, however, that the Hudbay Meeting or CMMC Meeting, as applicable, shall not be adjourned or postponed to a date later than the seventh business day prior to the Outside Date.

 

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Termination of the Arrangement Agreement

Termination by Either Party

The Arrangement Agreement may be terminated prior to the Effective Time by the mutual written agreement of the Parties, or by either CMMC or Hudbay if:

 

   

Occurrence of Outside Date. The Effective Time shall not have occurred on or before the Outside Date, except that such termination right is not available to any Party whose failure to perform any of its covenants or agreements or breach of any of its representations and warranties under the Arrangement Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur by the Outside Date;

 

   

Illegality. After the date of the Arrangement Agreement, there shall have been enacted, made or enforced any applicable Law (or any applicable Law shall have been amended) that makes consummation of the Arrangement illegal or otherwise prohibited or enjoins CMMC or Hudbay from consummating the Arrangement and such applicable Law, prohibition or enjoinment shall have become final and non-appealable; provided that the Party seeking to exercise this termination right has used its commercially reasonable efforts to, as applicable, appeal or overturn such Law or otherwise have it lifted or rendered non-applicable in respect of the Arrangement, and provided further that the enactment, making, enforcement or amendment of such Law was not primarily due to the failure of such Party to perform any of its covenants or agreements under the Arrangement Agreement;

 

   

Failure to Obtain CMMC Shareholder Approval. The CMMC Shareholder Approval shall not have been obtained at the CMMC Meeting (or any adjournment(s) or postponement(s) thereof) in accordance with the Interim Order, except that this right to terminate the Arrangement Agreement shall not be available to any Party whose failure to perform any of its covenants or agreements or breach of any of its representations and warranties in any material respect under the Arrangement Agreement has been the cause of, or resulted in, the failure to receive the CMMC Shareholder Approval; or

 

   

Failure to Obtain Hudbay Shareholder Approval. The Hudbay Shareholder Approval shall not have been obtained at the Hudbay Meeting (or any adjournment(s) or postponement(s) thereof) in accordance with applicable Law, except that this right to terminate the Arrangement Agreement shall not be available to any Party whose failure to perform any of its covenants or agreements or breach of any of its representations and warranties in any material respect under the Arrangement Agreement has been the cause of, or resulted in, the failure to receive the Hudbay Shareholder Approval.

Termination by Hudbay

The Arrangement Agreement may be terminated prior to the Effective Time by Hudbay if:

 

   

CMMC Change in Recommendation. The CMMC Board fails to recommend or withdraws, amends, modifies or qualifies, or proposes publicly to withdraw, qualify, amend or modify, in a manner adverse to Hudbay or fails to publicly reaffirm (without qualification) the CMMC Board Recommendation within five business days (and in any case prior to the CMMC Meeting) after having been requested in writing by Hudbay (acting reasonably) to do so or takes no position or a neutral position with respect to a publicly announced or publicly disclosed Acquisition Proposal in respect of the CMMC for more than five business days after such Acquisition Proposal’s public announcement or public disclosure (a “Change in Recommendation”);

 

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CMMC Breach of Non-Solicit. CMMC breaches, in any material respect, the covenants described under “Non-Solicitation” above;

 

   

CMMC Material Adverse Effect. A CMMC Material Adverse Effect after the date of the Arrangement Agreement has occurred and is continuing;

 

   

Breach of Representation or Warranty or Failure to Perform Covenants by CMMC. Subject to compliance with the notice and cure provisions of the Arrangement Agreement, (a) a breach of any representation or warranty, or (b) failure to perform any covenant or agreement on the part of CMMC set forth in the Arrangement Agreement (other than the covenants relating to non-solicitation and Acquisition Proposals described above), in each case, shall have occurred that would cause the mutual conditions precedent or conditions precedent to Hudbay’s obligations not to be satisfied, and such breach or failure is incapable of being cured prior to the Outside Date; provided that Hudbay is not then in breach of the Arrangement Agreement so as to cause any mutual condition precedent or condition precedent to CMMC’s obligations not to be satisfied; or

 

   

Hudbay Superior Proposal. Prior to the approval of the Hudbay Resolution, Hudbay wishes to enter into a Proposed Agreement with respect to a Hudbay Superior Proposal (other than a confidentiality and standstill agreement permitted by the Arrangement Agreement); provided that Hudbay is then in compliance with the covenants relating to non-solicitation and Acquisition Proposals described above in all material respects and that, prior to or concurrently with such termination, Hudbay pays the Hudbay Termination Payment described below.

Termination by CMMC

The Arrangement Agreement may be terminated prior to the Effective Time by CMMC if:

 

   

Hudbay Change in Recommendation. The Hudbay Board fails to recommend or withdraws, amends, modifies or qualifies, or proposes publicly to withdraw, qualify, amend or modify, in a manner adverse to CMMC or fails to publicly reaffirm (without qualification) the Hudbay Board Recommendation within five business days (and in any case prior to the Hudbay Meeting) after having been requested in writing by CMMC (acting reasonably) to do so or takes no position or a neutral position with respect to a publicly announced or publicly disclosed Acquisition Proposal in respect of Hudbay for more than five business days after such Acquisition Proposal’s public announcement or public disclosure (a “Hudbay Change in Recommendation”);

 

   

Hudbay Breach of Non-Solicit. Hudbay breaches, in any material respect, the covenants described under “Non-Solicitation” above;

 

   

Hudbay Material Adverse Effect. A Hudbay Material Adverse Effect after the date of the Arrangement Agreement has occurred and is continuing;

 

   

Breach of Representation or Warranty or Failure to Perform Covenants by Hudbay. Subject to compliance with the notice and cure provisions of the Arrangement Agreement, (i) a breach of any representation or warranty, or (ii) failure to perform any covenant or agreement on the part of Hudbay set forth in the Arrangement Agreement (other than the covenants described under “Non-Solicitation” above), in each case, shall have occurred that would cause the mutual conditions precedent or conditions precedent to CMMC’s obligations not to be satisfied, and such breach or failure is incapable of being cured prior to the Outside Date; provided that CMMC is not then in breach of the Arrangement Agreement so as to cause any mutual condition precedent or condition precedent to Hudbay’s obligations not to be satisfied; or

 

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CMMC Superior Proposal. Prior to the approval of the Arrangement Resolution, CMMC wishes to enter into a Proposed Agreement with respect to a CMMC Superior Proposal (other than a confidentiality and standstill agreement permitted by the Arrangement Agreement); provided that CMMC is then in compliance with the covenants relating to non-solicitation and Acquisition Proposals described above in all material respects and that, prior to or concurrently with such termination, CMMC pays the CMMC Termination Payment described below.

Termination Event and Termination Payment

The Arrangement Agreement provides that (a) if a Hudbay Termination Payment Event occurs, Hudbay shall pay, as liquidated damages in consideration for the loss of CMMC’s rights under the Arrangement Agreement, by wire transfer of immediately available funds, the Hudbay Termination Payment in the amount of C$69,000,000 to CMMC; and (b) if a CMMC Termination Payment Event occurs, CMMC shall pay, as liquidated damages in consideration for the loss of Hudbay’s rights under the Arrangement Agreement, by wire transfer of immediately available funds, the CMMC Termination Payment in the amount of C$22,000,000 to Hudbay.

A “CMMC Termination Payment Event” means the termination of the Arrangement Agreement:

 

   

by Hudbay upon the circumstances described in the paragraph “CMMC Change in Recommendation” or “CMMC Breach of Non-Solicit” under the heading “Termination of the Arrangement Agreement – Termination by Hudbay” above;

 

   

by CMMC upon circumstances described in the paragraph “CMMC Superior Proposal” under the heading “Termination of the Arrangement Agreement – Termination by CMMC” above; or

 

   

by either Party upon circumstances described in the paragraphs “Occurrence of Outside Date” or “CMMC Shareholder Approval” under the heading “Termination of the Arrangement Agreement – Termination by Either Party” above, or by Hudbay upon circumstances described in the paragraph “Breach of Representation or Warranty or Failure to Perform Covenants by CMMC” under the heading “Termination of the Arrangement Agreement – Termination by Hudbay” above, but, in each case, only if:

 

  (A)

prior to such termination, a bona fide Acquisition Proposal in respect of CMMC shall have been made to CMMC and publicly announced by any Person (other than Hudbay or its affiliates),

 

  (B)

such Acquisition Proposal has not expired or been withdrawn at least five business days prior to the CMMC Meeting, and

 

  (C)

within 12 months following the date of such termination, either (1) CMMC or one or more of its Subsidiaries enters into a Contract in respect of an Acquisition Proposal other than a confidentiality agreement permitted by the Arrangement Agreement (whether or not such Acquisition Proposal is the same Acquisition Proposal referred to in clauses (A) and (B) above) and such Acquisition Proposal is subsequently consummated (whether or not within such 12-month period), or (2) an Acquisition Proposal (whether or not such Acquisition Proposal is the same Acquisition Proposal referred to in clauses (A) and (B) above) is consummated.

 

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A “Hudbay Termination Payment Event” means the termination of the Arrangement Agreement:

 

   

by CMMC upon the circumstances described in the paragraph “Hudbay Change in Recommendation” or “Hudbay Breach of Non-Solicit” under the heading “Termination of the Arrangement Agreement – Termination by CMMC” above;

 

   

by Hudbay upon circumstances described in the paragraph “CMMC Superior Proposal” under the heading “Termination of the Arrangement Agreement – Termination by Hudbay” above; or

 

   

by either Party upon circumstances described in the paragraphs “Occurrence of Outside Date” or “CMMC Shareholder Approval” under the heading “Termination of the Arrangement Agreement – Termination by Either Party” above, or by CMMC upon circumstances described in the paragraph “Breach of Representation or Warranty or Failure to Perform Covenants by Hudbay” under the heading “Termination of the Arrangement Agreement –Termination by CMMC” above, but, in each case, only if:

 

  (A)

prior to such termination, a bona fide Acquisition Proposal in respect of Hudbay shall have been made to Hudbay and publicly announced by any Person (other than CMMC or its affiliates),

 

  (B)

such Acquisition Proposal has not expired or been withdrawn at least five business days prior to the Hudbay Meeting, and

 

  (C)

within 12 months following the date of such termination, either (i) Hudbay or one or more of its Subsidiaries enters into a Contract in respect of an Acquisition Proposal other than a confidentiality agreement permitted by the Arrangement Agreement (whether or not such Acquisition Proposal is the same Acquisition Proposal referred to in clauses (A) and (B) above) and such Acquisition Proposal is subsequently consummated (whether or not within such 12-month period), or (ii) an Acquisition Proposal (whether or not such Acquisition Proposal is the same Acquisition Proposal referred to in clauses (A) and (B) above) is consummated.

For purposes of the CMMC Termination Payment Event and the Hudbay Termination Payment Event referred to above, the term “Acquisition Proposal” has the meaning assigned to that term in the Arrangement Agreement, except that references to “20% or more” are deemed to be references to “50% or more”.

Amendments

Subject to the provisions of the Interim Order and Final Order and applicable Laws, the Plan of Arrangement and applicable Laws, the Arrangement Agreement and the Plan of Arrangement may, at any time and from time to time before or after the holding of the CMMC Meeting but not later than the Effective Time, be amended by mutual written agreement of the Parties, without further notice to or authorization on the part of the CMMC Shareholders, and any such amendment may without limitation:

 

   

change the time for performance of any of the obligations or acts of the Parties;

 

   

waive any inaccuracies or modify any representation or warranty contained herein or in any document delivered pursuant hereto;

 

   

waive compliance with or modify any of the covenants herein contained and waive or modify performance of any of the obligations of the Parties; and

 

   

waive compliance with or modify any mutual conditions precedent herein contained.

 

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In addition, pursuant to the Plan of Arrangement:

 

   

Hudbay and CMMC reserve the right to amend, modify or supplement the Plan of Arrangement at any time and from time to time, provided that each such amendment, modification or supplement must be (a) agreed to in writing by CMMC and Hudbay, (b) filed with the Court and, if made following the CMMC Meeting, approved by the Court, and (c) communicated to CMMC Shareholders and the holders of CMMC Incentive Awards if and as required by the Court.

 

   

subject to the provisions of the Interim Order, any amendment, modification or supplement to the Plan of Arrangement may be proposed by Hudbay and CMMC at any time prior to the CMMC Meeting (provided, however, that the Parties shall have consented thereto in writing), with or without any other prior notice or communication, and, if so proposed and accepted by the Persons voting at the CMMC Meeting (other than as may be required under the Interim Order), shall become part of the Plan of Arrangement for all purposes.

 

   

any amendment, modification or supplement to the Plan of Arrangement that is approved by the Court following the CMMC Meeting shall be effective only if: (a) it is consented to in writing by each of Hudbay and the CMMC (each acting reasonably); and (b) if required by the Court, it is consented to by the CMMC Shareholders voting in the manner directed by the Court.

 

   

any amendment, modification or supplement to the Plan of Arrangement may be made by CMMC and Hudbay without the approval of or communication to the Court or the CMMC Shareholders, provided that it concerns a matter which, in the reasonable opinion of CMMC and Hudbay, is of an administrative or ministerial nature required to better give effect to the implementation of the Plan of Arrangement and is not materially adverse to the financial or economic interests of any of the CMMC Shareholders.

 

   

the Plan of Arrangement may be withdrawn prior to the Effective Time in accordance with the terms of the Arrangement Agreement.

 

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SECURITIES LAW MATTERS

Interests of Certain Persons in the Arrangement

The directors, officers and other related parties of Hudbay and CMMC may have interests in the Arrangement that are, or may be, different from, or in addition to, the interests of other Hudbay Shareholders and CMMC Shareholders, respectively, and that may present them with actual or potential conflicts of interest in connection with the Arrangement. Other than the interests and benefits described below, all of which relate to CMMC, none of the directors or officers of Hudbay and CMMC or, to the knowledge of the directors and officers of Hudbay and CMMC, any of their respective associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon in connection with the Arrangement or that would materially affect the Arrangement. The CMMC Board was aware of these interests and considered them, among other matters, when recommending the approval of the Arrangement by CMMC Shareholders.

All of the benefits received, or to be received, by directors, officers or employees of CMMC as a result of the Arrangement are, and will be, solely in connection with their services as directors, officers or employees of CMMC. No benefit has been, or will be, conferred for the purpose of increasing the value of consideration payable to any such Person for CMMC Shares held by such Persons and no consideration is, or will be, conditional on the Person supporting the Arrangement.

Treatment of CMMC Incentive Awards

All CMMC Incentive Awards, including all Hudbay Replacement Options, will ultimately be settled in cash or Hudbay Shares and cancelled as part of the Arrangement. Each CMMC Incentive Award will be treated on the same basis as other awards granted pursuant to the same incentive plan. Pursuant to the Plan of Arrangement: (a) all CMMC RSUs and CMMC PSUs will be settled in CMMC Shares that thereafter convert to Hudbay Shares; (b) all CMMC DSUs, CMMC Phantom Options and CMMC Phantom RSUs will be settled in cash; and (c) all CMMC Options will be exchanged for Hudbay Replacement Options that thereafter settle in cash, unless otherwise exercised by the holder thereof for Hudbay Shares. The form of settlement (cash or Hudbay Shares) for the CMMC Incentive Awards was individually considered for each category of CMMC Incentive Award as part of the broader arm’s length Arrangement negotiations. In arriving at the foregoing settlement plan for the CMMC Incentive Awards, the Parties gave particular consideration to, among other things: (w) the number of incentive awards granted pursuant to each plan; (x) the fair and equal treatment of all CMMC Incentive Awards granted pursuant to the same incentive plan; and (y) the best use of the cash resources of Hudbay (and the Combined Company).

There were 2,754,375 CMMC PSUs and 3,020,441 CMMC RSUs issued and outstanding as of May 12, 2023 (being the last business day preceding the date of this Circular). On completion of the Arrangement, and assuming that the number of CMMC PSUs and CMMC RSUs issued and outstanding as of May 12, 2023 does not change prior to the Effective Date, it is expected that the total number of Hudbay Shares that will be issued in exchange therefor will be approximately 2,200,205 Hudbay Shares. Notwithstanding that the CMMC PSU Plan provides for the cash settlement of CMMC PSUs issued thereunder (representing approximately 25% of all CMMC PSUs, with CMMC PSUs granted under the CMMC LTIP representing the balance), such awards will be settled in Hudbay Shares of equivalent value pursuant to the Plan of Arrangement. With respect to CMMC PSUs and CMMC RSUs issued under the CMMC LTIP and CMMC RSU Plan, as applicable, the treatment of such CMMC PSUs and CMMC RSUs under the Plan of Arrangement is consistent with the terms of the CMMC LTIP and CMMC RSU Plan, as applicable, which allows for settlement of awards in shares.

There were 935,645 CMMC DSUs, 200,000 CMMC Phantom Options and 427,179 CMMC Phantom RSUs issued and outstanding as of May 12, 2023. No Hudbay Shares will be issued, or are issuable, to the holders of the CMMC DSUs, CMMC Phantom Options and CMMC Phantom RSUs in connection with the Arrangement. The treatment of the CMMC DSUs, CMMC Phantom Options and CMMC Phantom RSUs pursuant to the Plan of Arrangement is consistent with the terms of the governing incentive plan or individual award agreement, as applicable, all of which allow for cash settlement.

 

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There were 3,363,645 CMMC Options issued and outstanding as of May 12, 2023. As part of the Arrangement, the CMMC Options will be exchanged for Hudbay Replacement Options and thereafter settled in cash, unless a holder thereof elects to exercise all such Hudbay Replacement Options for Hudbay Shares. CMMC expects that all or substantially all of the Hudbay Replacement Options will be settled in cash. However, if all Hudbay Replacement Options are exercised in connection with the Arrangement and the number of CMMC Options issued and outstanding as of May 12, 2023 does not change prior to the Effective Date, approximately 1,281,549 Hudbay Shares would be issuable upon the exercise of the Hudbay Replacement Options. The treatment of the CMMC Options pursuant to the Plan of Arrangement is consistent with the terms of the CMMC Option Plan.

All CMMC Shares and CMMC Incentive Awards held by members of the CMMC Board and officers and senior vice presidents of CMMC (the “CMMC Executives”) and their associates and affiliates will be treated in the same fashion under the Arrangement as those held by other holders of CMMC Shares and CMMC Incentive Awards. See “The Arrangement – Arrangement Mechanics” for how the CMMC Shares and the CMMC Incentive Awards will be affected by the Arrangement.

CMMC Options

As of the CMMC Record Date, the members of the CMMC Board and the CMMC Executives set out below held 2,482,149 CMMC Options. Pursuant to the Plan of Arrangement, each CMMC Option outstanding immediately prior to the Effective Time will, without any further action by or on behalf of a holder, be exchanged for a Hudbay Replacement Option exercisable to purchase from Hudbay the number of Hudbay Shares equal to the product of the (A) number of CMMC Shares subject to the CMMC Option immediately before the Effective Time multiplied by (B) Exchange Ratio (provided that if the foregoing would result in the issuance of a fraction of a Hudbay Share on any particular exercise of Hudbay Replacement Options, then the number of Hudbay Shares otherwise issued will be rounded down to the nearest whole number of Hudbay Shares). The exercise price per Hudbay Share subject to any such Hudbay Replacement Option will be an amount equal to the quotient of the (X) exercise price per CMMC Share underlying the exchanged CMMC Option immediately prior to the Effective Time divided by (Y) Exchange Ratio (provided that the aggregate exercise price payable on any particular exercise of Hudbay Replacement Options will be rounded up to the nearest whole cent). It is intended that (a) the provisions of subsection 7(1.4) of the Tax Act apply to the aforesaid exchange of options and (b) such exchange of options be treated as other than the grant of a new stock right or a change in the form of payment pursuant to section 1.409A-1(b)(5)(v)(D) of the U.S. Treasury Regulations. Accordingly, and notwithstanding the foregoing, if required, the exercise price of a Hudbay Replacement Option will be adjusted such that the In-The-Money Value of the Hudbay Replacement Option immediately after the exchange does not exceed the In-The-Money Value of the CMMC Option for which it was exchanged immediately before the exchange. All terms and conditions of a Hudbay Replacement Option, including the term to expiry, conditions to and manner of exercising, will be the same as the CMMC Option for which it was exchanged, and will be governed by the terms of the applicable CMMC Option Plan and any document evidencing a CMMC Option will thereafter evidence and be deemed to evidence such Hudbay Replacement Option.

Following the exchange of CMMC Options for Hudbay Replacement Options, but also pursuant to the Plan of Arrangement, each Hudbay Replacement Option will be deemed to be fully vested on the Effective Date and, without any further action by or on behalf of a holder of a Hudbay Replacement Option, the holder’s Hudbay Replacement Options will either: (a) if prior to the exchange of CMMC Options for Hudbay Replacement Options as described above, Hudbay has received notice of the exercise of the holder’s Hudbay Replacement Options and the holder has paid the required exercise price to Hudbay, be exercised and the holder will be entitled to receive the Hudbay Shares issuable pursuant to the exercise of such Hudbay Replacement Options; or (b) in any other case, be transferred and assigned by the holder, free and clear of any Liens, to Hudbay and the holder will be entitled to receive in exchange therefor a cash payment from Hudbay equal to the (i) aggregate Hudbay Replacement Option Value of the holder’s Hudbay Replacement Options, less (ii) Applicable Withholdings (which Applicable Withholdings will be remitted to

 

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the applicable Governmental Entity on behalf of the holder), whereupon the name of the holder will be removed from the register of options maintained by Hudbay, and each Hudbay Replacement Option will immediately be cancelled and all agreements relating to the Hudbay Replacement Options will be terminated and will be of no further force and effect.

CMMC RSUs

As of the CMMC Record Date, the members of the CMMC Board and the CMMC Executives set out below held 2,084,993 CMMC RSUs. If the Arrangement is consummated, each CMMC RSU will be deemed to be fully vested on the Effective Date and will, without any further action by or on behalf of a holder, be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, and the holder thereof will be entitled to receive in exchange therefor and CMMC will issue in settlement of the holder’s CMMC RSUs that number of CMMC Shares which the holder would otherwise be entitled to receive under the CMMC RSU Plan in respect of each CMMC RSU, whereupon the name of such CMMC RSU holder will be removed from the register of CMMC RSUs maintained by CMMC, and the CMMC RSU Plan, and each CMMC RSU will immediately be cancelled and all agreements relating to the CMMC RSUs will be terminated and will be of no further force and effect, and the holder will be and will be deemed to be the holder of that number of CMMC Shares so issued.

CMMC PSUs

As of the CMMC Record Date, the members of the CMMC Board and the CMMC Executives set out below held 1,543,554 CMMC PSUs. If the Arrangement is consummated, each CMMC PSU will, without any further action by or on behalf of a holder, be deemed to be fully vested on the Effective Date and will be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, the Adjustment Factor or the Performance Multiplier, as applicable, will be deemed to be 100%, and the holder thereof will be entitled to receive in exchange therefor and CMMC will issue in settlement of the holder’s CMMC PSUs that number of CMMC Shares which the holder would otherwise be entitled to receive under the CMMC PSU Plan in respect of each CMMC PSU, whereupon the name of such CMMC PSU holder will be removed from the register of CMMC PSUs maintained by CMMC, and the CMMC PSU Plan and the CMMC LTIP and each CMMC PSU will immediately be cancelled and all agreements relating to the CMMC PSUs will be terminated and will be of no further force and effect, and the holder will be and will be deemed to be the holder of that number of CMMC Shares so issued.

CMMC DSUs

As of the CMMC Record Date, members of the CMMC Board held 935,645 CMMC DSUs. If the Arrangement is consummated, each CMMC DSU will, without any further action by or on behalf of a holder, be deemed to be fully vested on the Effective Date and will be transferred and assigned by the holder thereof, free and clear of any Liens, to CMMC, and the holder thereof will be entitled to receive in exchange therefor a cash payment from CMMC equal to the (A) aggregate CMMC DSU Value of the holder’s CMMC DSUs, less (B) Applicable Withholdings (which Applicable Withholdings will be remitted to the applicable Governmental Entity on behalf of the holder), whereupon the name of such CMMC DSU holder will be removed from the register of CMMC DSUs maintained by CMMC, and the CMMC DSU Plan and each CMMC DSU will immediately be cancelled and all agreements relating to the CMMC DSUs will be terminated and will be of no further force and effect.

CMMC Phantom Options

As of the CMMC Record Date, no members of the CMMC Board or the CMMC Executives held CMMC Phantom Options.

 

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CMMC Phantom RSUs

As of the CMMC Record Date, no members of the CMMC Board or the CMMC Executives held CMMC Phantom RSUs.

Consideration

The following table sets out the names and positions of the members of the CMMC Board and the CMMC Executives as of the CMMC Record Date, the number of CMMC Shares and CMMC Incentive Awards owned, or over which control or direction was exercised, by each such member of the CMMC Board or officer of CMMC and, where known after reasonable inquiry, by their respective associates or affiliates and the consideration to be received for such CMMC Shares or CMMC Incentive Awards pursuant to the Arrangement.

 

Name and

Position

  

CMMC

Shares

(% of

I/O)(1)

  

(a)

Consideration

received from

CMMC Shares

(C$)(2)

   CMMC Incentive Awards     

(b)

Consideration

received from

CMMC Incentive

Awards (C$)(2)(3)

  

(a) + (b)

Total

Consideration

from CMMC

Shares and CMMC

Incentive Awards

(C$)

   CMMC
RSUs
     CMMC
PSUs
     CMMC
DSUs
     CMMC
Options
 

Gilmour Clausen Director, President and Chief Executive Officer

   6,351,276 (2.96%)    16,957,907      639,925        579,078        –          173,980      3,618,357    20,576,264

Letitia Wong Chief Financial Officer

   336,512 (0.16%)    898,487      505,157        265,911        –          916,220      3,667,787    4,566,274

Donald Strickland Chief Operating Officer

   454,012 (0.21%)    1,212,212      382,137        304,847        –          –        1,834,246    3,046,458

Brad Bolger Senior Vice President, Finance

   –      –        127,107        107,642        –          169,120      954,252    954,252

Lance Newman Senior Vice President, Development

   311,500 (0.15%)    831,705      358,882        178,399        –          768,851      2,767,474    3,599,179

Patrick Redmond Senior Vice President, Exploration and Geoscience

   50,000 (0.023%)    133,500      71,785        107,677        –          –        479,165    612,665

William Washington Director

   500,000 (0.23%)    1,335,000      –          –          201,061        276,989      1,019,672    2,354,672

Edward Dowling Director

   40,000 (0.02%)    106,800      –          –          194,761        –        520,012    626,812

Jeane Hull Director

   –      –        –          –          65,427        –        174,690    174,690

M. Stephen Enders Director

   –      –        –          –          64,482        –        172,166    172,166

Michele Buchignani Director

   165,000 (0.08%)    440,550      –          –          201,061        176,989      878,672    1,319,222

Paula Rogers Director

   40,000 (0.02%)    106,800      –          –          96,028        –        256,394    363,194

Peter Sullivan Director

   –      –        –          –          112,826        –        301,245    301,245

 

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Notes                

 

(1)

Based on 214,383,473 CMMC Shares issued and outstanding as of the CMMC Record Date. Unless otherwise indicated, the holdings of the applicable member of the CMMC Board or CMMC Executive are less than or equal to 0.01% of the issued and outstanding CMMC Shares.

(2)

The Consideration implies a value of approximately C$2.67 per CMMC Share based on the closing price of the Hudbay Shares on the TSX on April 12, 2023, the business day immediately prior to the announcement that Hudbay and CMMC had entered into the Arrangement Agreement.

(3)

The cash amount exchanged for, and in settlement of, CMMC DSUs and CMMC Options held by those members of the CMMC Board and CMMC Executives was calculated in accordance with the CMMC DSU Plan and CMMC Option Plan, respectively.

In addition, as a result of the Arrangement, certain CMMC Executives may receive additional benefits as described below under the heading “Amended Employment Agreement and Consulting Agreement” (in the case of Mr. Gilmour Clausen, the President and Chief Executive Officer of CMMC) and “Termination and Change of Control Benefits” (in the case of the other CMMC Executives).

Amended Employment Agreement and Consulting Agreement

On November 9, 2022, CMMC announced that it had initiated a succession planning process in connection with the planned retirement of Mr. Gilmour Clausen. This process concluded on March 16, 2023 with the announcement by CMMC of the appointment of Mr. Patrick Merrin as President and Chief Executive Officer of CMMC effective as of April 24, 2023. In connection with his appointment, CMMC and Mr. Merrin entered into an executive employment agreement (the “Merrin Employment Agreement”) which set out, among other things, the duties and responsibilities of Mr. Merrin as President and Chief Executive Officer of CMMC and his contractual executive compensation entitlements.

In connection with the execution of the Arrangement Agreement on April 13, 2023, Mr. Clausen entered into a separation and consulting agreement with CMMC (the “Consulting Agreement”) pursuant to which he agreed to (a) defer the date of his retirement and remain as President and Chief Executive Officer of CMMC until the closing of the Arrangement, in order to facilitate the successful closing of the Arrangement, and (b) provide specified ongoing support and assistance for a 12-month period following completion of the Arrangement as an independent consultant to the Combined Company. CMMC and Mr. Merrin also agreed to amend the Merrin Employment Agreement (the “Amended Merrin Employment Agreement”) to, among other things, suspend Mr. Merrin’s appointment as President and Chief Executive Officer and vary his corresponding duties and responsibilities as a full-time exclusive employee of CMMC during the period between April 24, 2023 and the completion of the Arrangement. Pursuant to the terms of the Amended Merrin Employment Agreement, Mr. Merrin will assume the role of President and Chef Executive Officer of CMMC only if the Arrangement fails to close.

The Merrin Employment Agreement contains “double trigger” change of control provisions which provide that Mr. Merrin is entitled to receive a severance payment in the event of a “Change in Control” (as defined in the Merrin Employment Agreement) which is followed by the termination of Mr. Merrin’s employment without “Cause” (as defined in the Merrin Employment Agreement) or the resignation of Mr. Merrin for “Good Reason” (as defined in the Merrin Employment Agreement) within 12 months of the completion of such “Change in Control”. The completion of the Arrangement constitutes a “Change in Control” under the Merrin Employment Agreement. Accordingly, in the event that the Arrangement is completed and Mr. Merrin’s employment is terminated without “Cause” or he resigns for “Good Reason” within 12 months of the completion of such “Change in Control”, Mr. Merrin will be entitled to receive a severance payment in an aggregate amount equal to C$2,589,888, as calculated in accordance with the terms of the Merrin Employment Agreement.

Mr. Clausen is not entitled to receive any change of control or other bonus or payment solely as a consequence of the Arrangement or any other severance payment, whether under the Consulting Agreement or otherwise. Instead, in consideration for Mr. Clausen’s agreement to postpone his retirement and remain as President and Chief Executive Officer of CMMC until completion of the Arrangement, and his agreement to provide specified ongoing support and assistance for a 12-month period following completion of the Arrangement as an independent consultant to the Combined Company, under the terms of the Consulting Agreement, Mr. Clausen will be entitled to receive (a) his normal base salary during the

 

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period between January 1, 2023 and the completion of the Arrangement, (b) a prorated short-term incentive award for the period between January 1, 2023 and the completion of the Arrangement determined in accordance with CMMC’s short-term incentive plan (the “STIP”), (c) a pro-rated long-term incentive award for the period between January 1, 2023 and the completion of the Arrangement determined in accordance with the CMMC LTIP, and (d) an aggregate fee for consulting services rendered of $680,000 during the 12-month period following completion of the Arrangement. Having regard to the severance payment payable to Mr. Merrin as CEO-elect pursuant to the Amended Merrin Employment Agreement, Mr. Clausen’s Consulting Agreement does not give rise a CEO change of control or severance payment.

Termination and Change of Control Benefits

No director, officer or employee of CMMC is entitled to any change of control or other bonus or payment solely as a consequence of the Arrangement.

The employment agreements (the “Executive Employment Agreements”) of the CMMC Executives (other than, Messrs. Clausen and Merrin, which are described above) contain “double trigger” change of control provisions. The Executive Employment Agreements provide that each such CMMC Executive is entitled to receive a severance payment in the event of a “Change in Control” (as defined in each Executive Employment Agreement) which is followed by the termination of such Person’s employment without “Cause” (as defined in each Executive Employment Agreement), or the resignation of such Person for “Good Reason” (as defined in each Executive Employment Agreement) within 12 months of the completion of such “Change in Control”. The completion of the Arrangement constitutes a “Change in Control” pursuant to the Executive Employment Agreements.

Pursuant to the terms of each Executive Employment Agreement, upon a “Change in Control” followed by the termination of the CMMC Executive without “Cause”, or the resignation of such Person for “Good Reason” within 12 months following a “Change in Control”, as applicable, such Person is entitled to receive a severance payment in an aggregate amount equal to the sum of (a) any base salary and vacation pay earned by such Person and payable to such Person, prorated to the date of termination or resignation (as applicable), (b) any declared but unpaid STIP award for any fiscal year ended prior to the date of termination or resignation (as applicable), (c) a prorated STIP award for the period ending on the date of termination or resignation (as applicable), calculated as a prorated percentage of the STIP award earned by such Person in the immediately preceding fiscal year, and (d) a lump-sum amount equal to the product of (i) the sum of such Person’s base salary and target STIP award and (ii) a predetermined multiplier (being 2.0 for Ms. Wong, 1.5 for Mr. Strickland, and 1.0 for Messrs. Bolger, Newman and Redmond). In addition, any earned but unvested awards granted pursuant to the CMMC LTIP shall immediately vest and become exercisable or payable, as applicable.

The severance payments payable to certain of the CMMC Executives as of the CMMC Record Date pursuant to each such Person’s Executive Employment Agreement (as described above) in the event that the Arrangement is completed and the employment of such Person is terminated without “Cause”, or such Person resigns for “Good Reason” within 12 months of the completion of the Arrangement are as follows: (a) $1,638,379, in the case of Ms. Letitia Wong, Chief Financial Officer, (b) $1,328,259, in the case of Mr. Donald Strickland, Chief Operating Officer, (c) $636,911, in the case of Mr. Brad Bolger, Senior Vice President, Finance, (d) $828,329, in the case of Mr. Lance Newman, Senior Vice President, Project Development, and (e) $701,632, in the case of Mr. Patrick Redmond, Senior Vice President, Exploration and Geoscience, in each case, as calculated in accordance with each such Person’s Executive Employment Agreement. As described above, Mr. Clausen is not entitled to receive any change of control or other bonus or payment solely as a consequence of the Arrangement or any other severance payment, whether under the Consulting Agreement or otherwise.

 

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Continuing Insurance Coverage and Indemnification for Directors and Officers of CMMC

The Arrangement Agreement provides for the purchase by CMMC of customary “tail” policies of directors’ and officers’ liability insurance prior to the Effective Date which provide protection no less favourable in the aggregate than the protection provided by the policies maintained by CMMC and its Subsidiaries in effect immediately prior to the Effective Date, and which provide protection in respect of claims arising from facts or events which occurred on or prior to the Effective Date. The Arrangement Agreement also requires Hudbay to, or to cause CMMC and its Subsidiaries to, maintain such tail policies in effect without any reduction in scope or coverage for six years from the Effective Date; provided that the cost of such policies do not exceed 300% of the current annual aggregate premium for the directors’ and officers’ insurance policies currently maintained by CMMC or its Subsidiaries (the “Base Premium”); and provided further that if such insurance can only be obtained at a premium in excess of the Base Premium, CMMC may purchase such insurance at such excess premium only on commercially reasonable terms and market-based pricing following consultation in good faith with Hudbay and with Hudbay’s consent (not to be unreasonably withheld, conditioned or delayed). These obligations survive the completion of the Arrangement.

Pursuant to the Arrangement Agreement, Hudbay has agreed to honour all rights to indemnification or exculpation existing in favour of present and former officers and directors of CMMC and its Subsidiaries to the extent that they were disclosed to Hudbay. Hudbay has further acknowledged that such rights, to the extent that they were disclosed to Hudbay, will survive the completion of the Arrangement for a period of not less than six years from the Effective Date.

Hudbay Board and Senior Officer Appointments

Following completion of the Arrangement, the Hudbay Board will consist of 12 directors, comprised of 10 directors from Hudbay and two directors from CMMC. Hudbay has also agreed to extend offers of employment to two existing senior executives of CMMC to join its existing senior management team. The final composition of the Hudbay Board and the identity of the two senior executives of CMMC that will be extended offers of employment will be determined prior to the Effective Date.

Intentions of Directors and Senior Management

As of the CMMC Record Date, the members of the CMMC Board and senior officers of CMMC who entered into CMMC Support and Voting Agreements beneficially owned, directly or indirectly, or exercised control or direction over, collectively 7,886,800 CMMC Shares representing approximately 3.68% of the issued and outstanding CMMC Shares. Pursuant to the CMMC Support and Voting Agreements, the CMMC Supporting Shareholders have agreed, among other things and subject to the terms and conditions of the CMMC Support and Voting Agreements, to vote their CMMC Shares in favour of the Arrangement Resolution to approve the Arrangement. All directors, officers or employees of CMMC will be receiving the same Consideration for their CMMC Shares under the Arrangement as all other CMMC Shareholders.

Multilateral Instrument 61-101

CMMC is subject to MI 61-101. MI 61-101 is intended to regulate certain transactions to ensure fair and equal treatment among securityholders, generally requiring enhanced disclosure, approval by a majority of securityholders excluding “interested parties” or “related parties” (as such terms are defined in MI 61-101), independent valuations and, in certain instances, approval and oversight of the transaction by a special committee of independent directors. The protections of MI 61-101 generally apply to “business combinations” (as such term is defined in MI 61-101) that terminate the interests of securityholders without their consent in circumstances where a related party is entitled to consideration for a security that is not identical in amount and form to the entitlement of securityholders generally or is entitled to a “collateral benefit” (as such term is defined in MI 61-101). If a transaction is a “business combination”, MI 61-101 would require that, in addition to the approval of the transaction by at least two-thirds of the votes cast by all shareholders present or represented by proxy at a shareholders meeting, the transaction would also require the approval of a simple majority of the votes cast by shareholders, excluding votes cast in respect of shares held by related parties who receive a collateral benefit as a consequence of such transaction.

 

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A collateral benefit includes any benefit that a related party of CMMC is entitled to receive as a consequence of the Arrangement, including without limitation, an increase in salary, a lump sum payment, a payment for surrendering securities or other enhancement in benefits related to services as an employee, director or consultant of CMMC. MI 61-101 excludes from the meaning of collateral benefit a payment per security that is identical in amount and form to the entitlement of the general body of holders in Canada or securities of the same class, as well as certain benefits to a related party that is received solely in connection with the related party’s service as an employee, director or consultant of the issuer, of an affiliated entity of the issuer or of a successor to the business of the issuer where: (a) the benefit is not conferred for the purpose, in whole or in part, of increasing the value of the consideration paid to the related party for securities relinquished under the transactions; (b) the benefit is not, by its terms, conditional on the related party supporting the transaction in any manner; (c) full particulars of the benefit are disclosed in the disclosure document for the transaction; and (d) either (i) the related party and his or her associated entities beneficially owns, or exercises control or direction over, less than 1% of each class of the outstanding securities of the issuer, or (ii) the related party discloses to an independent committee of the issuer the amount of the consideration that he or she expects to be beneficially entitled to receive, under the terms of the transaction, in exchange for the equity securities he or she beneficially owns and the independent committee acting in good faith determines that the value of the benefit, net of any offsetting costs to the related party, is less than 5% of the value of the consideration the related party will receive pursuant to the terms of the transaction for the equity securities it beneficially owns, and the independent committee’s determination is disclosed in the disclosure document for the transaction.

In connection with the Arrangement, the outstanding CMMC Incentive Awards will be treated as set forth under “Securities Law Matters – Interests of Certain Persons in the Arrangement”, and the CMMC Executives are entitled to certain rights under the Consulting Agreement and the Executive Employment Agreements, as applicable, as set forth and in the circumstances described under “Securities Law Matters – Interests of Certain Persons in the ArrangementAmended Employment Agreement and Consulting Agreement” and “Securities Law Matters – Interests of Certain Persons in the Arrangement – Termination and Change of Control Benefits”. CMMC has considered whether these entitlements may constitute collateral benefits for purposes of MI 61-101 such that the Arrangement would therefore constitute a “business combination” under MI 61-101. CMMC has determined that the only related party who is receiving a collateral benefit for the purposes of MI 61-101 in connection with the Arrangement and beneficially owns or exercises control or direction over more than 1% of CMMC’s outstanding equity securities is Mr. Gilmour Clausen. Mr. Clausen beneficially owns or exercises control over 6,351,276 CMMC Shares (calculated in accordance with the provisions of MI 61-101), representing approximately 2.96% of the outstanding CMMC Shares, and the value of the collateral benefit he will receive is greater than 5% of the total consideration he will receive. Consequently, the Arrangement constitutes a business combination in respect of CMMC and, as a result, “minority approval” (as defined in MI 61-101) is required for the Arrangement Resolution. The CMMC Shares Mr. Clausen beneficially owns, directly or indirectly, or over which he has control or direction, will be excluded for the purpose of determining if minority approval of the Arrangement Resolution is obtained. This minority approval is in addition to the requirement that the Arrangement Resolution be approved by at least two-thirds of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting.

CMMC is not required to obtain a formal valuation under MI 61-101 as no “interested party” (as defined in MI 61-101) is, as a consequence of the Arrangement, directly or indirectly acquiring CMMC or its business or combining with CMMC, whether alone or with joint actors, and there is no “connected transaction” that would qualify as a “related party transaction” (as defined in MI 61-101) for which CMMC would be required to obtain a formal valuation. Furthermore, except as described under “The Arrangement – Background to the Arrangement”, neither CMMC nor any director or executive officer of CMMC, after reasonable inquiry, has knowledge of any “prior valuation” (as defined in MI 61-101) in respect of CMMC that has been made in the 24 months before the date of this Circular and no bona fide prior offer (as contemplated in MI 61-101) that relates to the transactions contemplated by the Arrangement has been received by CMMC during the 24 months prior to the date of the Arrangement Agreement.

 

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Other Canadian Securities Law Considerations

The Hudbay Shares to be issued to CMMC Shareholders pursuant to the Arrangement, will be issued in reliance on exemptions from the prospectus and registration requirements of Canadian Securities Laws, will generally be “freely tradeable” and the resale of such Hudbay Shares will be exempt from the prospectus requirements (and not subject to any “restricted period” or “hold period”) under Canadian Securities Laws if the following conditions are met: (a) the trade is not a “control distribution” (as defined under Canadian Securities Laws); (b) no unusual effort is made to prepare the market or to create a demand for the Hudbay Shares; (c) no extraordinary commission or consideration is paid to a Person or company in respect of the trade; and (d) if the selling shareholder is an insider or an officer of Hudbay, the selling shareholder has no reasonable grounds to believe that Hudbay is in default of applicable securities legislation. CMMC Shareholders are urged to consult their legal advisors to determine the applicability to them of the resale restrictions prescribed by Canadian Securities Laws applicable to trades in Hudbay Shares issued pursuant to the Arrangement.

United States Securities Law Considerations

The following discussion is only a general overview of certain requirements of U.S. Securities Laws that may be applicable to the Consideration Shares and Hudbay Replacement Options issuable upon completion of the Arrangement. All holders of such securities are urged to consult with their own counsel to ensure compliance with U.S. Securities Laws.

The following discussion does not address the Canadian Securities Laws that will apply to the issue of Consideration Shares and Hudbay Replacement Options or the resale of any such securities, within Canada by CMMC Shareholders and CMMC Option holders in the United States. CMMC Shareholders and CMMC Option holders in the United States reselling any such securities in Canada must comply with Canadian Securities Laws, as outlined elsewhere in this Circular.

The offer and sale of the Consideration Shares issuable to CMMC Shareholders and CMMC CDI holders in exchange for their CMMC Shares and CMMC CDIs, respectively, and the offer and sale of the Hudbay Replacement Options issuable in exchange for CMMC Options, in each case pursuant to the Arrangement, have not been and will not be registered under the U.S. Securities Act or applicable U.S. state Securities Laws, and such securities will be issued in reliance upon the Section 3(a)(10) Exemption and exemptions from applicable U.S. state Securities Laws. The Section 3(a)(10) Exemption exempts the issuance of any securities issued in exchange for one or more bona fide outstanding securities from the general requirement of registration under the U.S. Securities Act where the terms and conditions of the issuance and exchange of such securities have been approved by a court of competent jurisdiction that is expressly authorized by law to grant such approval, after a hearing upon the substantive and procedural fairness of the terms and conditions of such issuance and exchange at which all Persons to whom it is proposed to issue the securities have the right to appear and receive timely notice thereof. The Court is authorized to conduct a hearing at which the procedural and substantive fairness of the terms and conditions of the Arrangement will be considered. All persons to whom it is proposed to issue the securities are entitled to appear and be heard at this hearing, provided that they satisfy the applicable conditions set forth in the Interim Order. The Court granted the Interim Order on May 15, 2023 and, subject to the approval of the Arrangement by CMMC Shareholders, a hearing on the Arrangement is expected to be held on or about June 15, 2023 by the Court. Accordingly, the Final Order, if granted, will constitute the basis for an exemption from the registration requirements of the U.S. Securities Act, pursuant to the Section 3(a)(10) Exemption, with respect to the issuance of the Consideration Shares to CMMC Shareholders and CMMC CDI holders in exchange for their CMMC Shares and CMMC CDIs, respectively, and the issuance of the Hudbay Replacement Options to holders of CMMC Options in exchange for their CMMC Options, in each case pursuant to the Arrangement upon completion of the Arrangement. The Court has been informed of this effect of the Final Order.

The Consideration Shares to be received by CMMC Shareholders and CMMC CDI holders, respectively, pursuant to the Arrangement upon completion of the Arrangement (which, for avoidance of doubt, does not include the Hudbay Shares issuable upon exercise of the Hudbay Replacement Options), may be resold without restriction under the U.S. Securities Act, except by Persons who are “affiliates” (as defined in Rule 144 of the U.S. Securities Act) of Hudbay after the completion of the Arrangement or who were affiliates of Hudbay within 90 days prior to the completion of the Arrangement. Persons who may be deemed to be affiliates of an issuer generally include individuals or entities that control, are controlled by, or are under

 

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common control with, the issuer, whether through the ownership of voting securities, by contract or otherwise, and generally include executive officers and directors of the issuer as well as principal shareholders of the issuer. Typically, persons who are executive officers, directors or 10% or greater shareholders of an issuer are considered to be its “affiliates”. Consideration Shares received by such affiliates or former affiliates of Hudbay will be subject to certain restrictions on resale imposed by the U.S. Securities Act, such that they may not resell such securities in the absence of registration under the U.S. Securities Act or an exemption from such registration, if available, such as the exemption provided by Rule 144 under the U.S. Securities Act or the safe harbor provided by Rule 904 of Regulation S under the U.S. Securities Act.

The exemption from the registration requirements of the U.S. Securities Act provided by section 3(a)(10) thereof does not exempt the issuance of securities upon the exercise of securities that were previously issued pursuant to the Section 3(a)(10) Exemption or were issued pursuant to another exemption from registration under the U.S. Securities Act. Therefore, the Hudbay Shares issuable upon exercise of the Hudbay Replacement Options to be issued pursuant to the Arrangement may not be issued in reliance upon the Section 3(a)(10) Exemption and the Hudbay Replacement Options may be exercised only pursuant to an available exemption from the registration requirements of the U.S. Securities Act and applicable U.S. state Securities Laws. Prior to the issuance of Hudbay Shares pursuant to any such exercise, Hudbay may require evidence (which may include an opinion of counsel) reasonably satisfactory to Hudbay to the effect that the issuance of such Hudbay Shares does not require registration under the U.S. Securities Act or applicable U.S. state Securities Laws.

The Hudbay Shares issued upon exercise of the Hudbay Replacement Options by holders in the United States or who are U.S. Persons will be “restricted securities”, as such term is defined in Rule 144 under the U.S. Securities Act, and may not be resold unless such securities are registered under the U.S. Securities Act and all applicable U.S. state Securities Laws or unless an exemption from such registration requirements is available.

Further information applicable to U.S. securityholders is disclosed under the heading “Joint Management Information Circular – Information for United States Shareholders”.

Australian Securities Law Considerations

Not a Prospectus

This Circular is not, and is not required to be, a prospectus under the Australian Corporations Act. It has been prepared to address requirements of the Laws of the relevant provinces and territories of Canada and its content may not be the same, or presented in the same manner, as information in a prospectus.

Pursuant to the Arrangement Agreement, Hudbay agreed to do all things necessary to ensure that the Consideration Shares to be distributed to Australian Shareholders pursuant to the Plan of Arrangement are exempt from prospectus requirements under the Australian Corporations Act and will be freely tradeable shares immediately following the date on which the Plan of Arrangement becomes Effective (as defined in the Arrangement Agreement). The Consideration Shares will be distributed to Australian Shareholders in reliance on the ASIC Corporations (Foreign Scrip Bids) Instrument 2015/357 on the basis that the time for determining the number of Australian resident shareholders is April 25, 2023.

In addition, the Plan of Arrangement provides that notwithstanding any other provision of the Plan of Arrangement, if it appears to Hudbay that it would be contrary to Law to issue Consideration Shares pursuant to the Arrangement to any CMMC Shareholder that is not a resident in Canada or the United States, respectively, the Consideration Shares that otherwise would be issued to that Person may be issued by Hudbay to the Depositary or another nominee appointed by Hudbay acting as agent for that Person. The Consideration Shares so issued to the Depositary or such nominee, as applicable, will be sold on behalf of that Person as soon as practicable after the Effective Date in the normal course of trading on the TSX and/or the NYSE, on such dates and at such prices as the Depositary or the nominee, as applicable,

 

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determines in its sole discretion as agent for such Person. Each such Person shall be entitled to receive a pro rata share of the proceeds of sale (after withholding or deducting any applicable Taxes) of such Consideration Shares on the basis of each such Person’s Consideration Shares held by the Depositary or nominee on behalf of such Person and in full satisfaction of such Person’s Consideration Shares held by the Depositary or nominee on behalf of such Person. The net proceeds of such sale will be remitted to such Person in the same manner as any other cash payments to be delivered to CMMC Shareholders pursuant to the Plan of Arrangement.

Not Australian Shares

Similar to CMMC and the CMMC Shares, Hudbay is not an Australian company and the Hudbay Shares are not shares in an Australian company. Consequently, Hudbay is only regulated under the Australian Corporations Act to a limited extent as a foreign company. Hudbay is subject to the Laws of the Canadian Province of Ontario, and is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut. Accordingly, rights of Hudbay Shareholders in Australia will be determined predominantly under the Laws of the relevant Canadian provinces and territories.

No ASX Listing

Unlike the CMMC Shares, (which are listed on the ASX by way of the CMMC CDIs) the Hudbay Shares are not, and after completion of the Arrangement will not be, listed on the ASX.

Rights and Entitlements of CMMC CDIs

CMMC CDI holders will receive Hudbay Shares pursuant to the Plan of Arrangement. Details of the settlement timetable for the CMMC CDIs are in the process of being confirmed with the ASX. It is anticipated that after the necessary shareholder and court approvals are obtained and closing of the Arrangement is ready to be initiated, trading in CMMC CDIs will go into voluntary suspension for a period of approximately three trading days in anticipation of the closing of the Arrangement. During that time, the ability to transmute CMMC CDIs into the underlying CMMC Shares, and vice versa, is expected to be restricted. Following the Arrangement, the Hudbay Shares will not be listed on the ASX.

Enforcement Warning

The enforcement by Hudbay Shareholders and CMMC Shareholders of any applicable Laws of Australia, including Laws as to misleading conduct, or the common law including Laws relating to negligence, may be affected adversely by the fact that Hudbay and CMMC are organized under the Laws of Ontario, Canada, being a jurisdiction outside Australia, that some or all of the officers and directors of Hudbay and CMMC, respectively, are residents of countries other than Australia, that some or all of the experts named in this Circular and the documents incorporated by reference herein are residents of countries other than Australia and that some or all of the assets of Hudbay, CMMC and such Persons are located outside Australia. As a result, it may be difficult for Hudbay Shareholders and CMMC Shareholders in Australia to take action in Australian federal or state courts and under Australian Law against Hudbay, CMMC and such Persons. In addition, Hudbay Shareholders and CMMC Shareholders in Australia cannot be assured that the courts of Canada would enforce judgements of Australian courts obtained in actions under the Laws of Australia against such Persons.

See “Joint Management Information Circular – Information for Australian Shareholders” for further information relevant to Australian Shareholders of CMMC.

 

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INFORMATION CONCERNING THE HUDBAY MEETING

The Hudbay Meeting will be held on June 13, 2023, subject to any adjournment or postponement thereof, in a virtual-only format via live webcast available online at https://web.lumiagm.com/265891707, using password hudbayspecial (case sensitive) at 10:30 a.m. (Toronto Time) for the purposes set forth in the accompanying Notice of Special Meeting of Shareholders of Hudbay.

The solicitation of proxies is intended to be primarily by mail but may also be made by telephone, e-mail, Internet, fax transmission or other electronic means of communication or in person by the directors, officers, employees and representatives of Hudbay. The total cost of soliciting proxies and mailing the materials in connection with the Hudbay Meeting will be borne by Hudbay. In addition, Hudbay and CMMC have engaged Kingsdale Advisors as their strategic shareholder advisor and proxy solicitation agent and will pay fees of approximately C$200,000, in aggregate, to Kingsdale Advisors for proxy solicitation services in addition to certain out-of-pocket expenses. Hudbay and CMMC may also reimburse brokers and other persons holding Shares in their name or in the name of nominees for their costs incurred in sending proxy material to their principals in order to obtain their proxies. Kingsdale Advisors’ fee will be borne in equal amounts by Hudbay and CMMC.

Officers and directors of Hudbay, collectively holding approximately 0.28% of the total Hudbay Shares, as at the Hudbay Record Date, have entered into Hudbay Support and Voting Agreements with CMMC pursuant to which the Hudbay Supporting Shareholders have agreed to, among other things, support the Arrangement and vote all Hudbay Shares beneficially owned by them in favour of the Hudbay Resolution, subject to the terms and conditions of such agreements.

Purpose of the Hudbay Meeting

This Circular is furnished in connection with the solicitation of proxies by the management of Hudbay for use at the Hudbay Meeting. As set out in the Notice of Special Meeting of Shareholders of Hudbay, at the Hudbay Meeting, Hudbay Shareholders will be asked to consider and vote on the Hudbay Resolution.

Hudbay Shareholder approval is required in connection with the Arrangement pursuant to the rules and regulations of the TSX. In connection with the Arrangement, Hudbay has reserved for issuance, approximately 89,663,961 Hudbay Shares for issuance to CMMC Shareholders (based on the number of CMMC Shares outstanding on April 12, 2023), representing approximately 34.2% of the Hudbay Shares on a non-diluted basis as of such date. Pursuant to section 611(c) of the TSX Company Manual, a listed company is generally required to obtain shareholder approval in connection with an acquisition transaction where the number of securities issued or issuable in payment of the purchase price for the acquisition exceeds 25% of the number of securities of the listed issuer which are outstanding, on a non-diluted basis, prior to the date of closing of the transaction.

The Hudbay Resolution approves the issuance of up to 89,663,961 Hudbay Shares in connection with the acquisition of all of the CMMC Shares, such number of Hudbay Shares consisting of: (a) up to 83,932,999 Hudbay Shares issuable to CMMC Shareholders pursuant to the Plan of Arrangement; (b) up to 1,461,250 Hudbay Shares issuable upon the exercise of Hudbay Replacement Options to be issued in exchange for CMMC Options issued and outstanding as of the CMMC Record Date; and (c) 4,269,712 Hudbay Shares as a 5% buffer of the foregoing amounts to account for clerical and administrative matters. No Hudbay Shares will be issued, or are issuable, to the holders of the CMMC DSUs, CMMC Phantom Options and CMMC Phantom RSUs in connection with the Arrangement.

The TSX will generally not require further Hudbay Shareholder approval for the issuance of up to an additional 22,415,990 Hudbay Shares, such number being 25% of the number of Hudbay Shares approved for issuance pursuant to the Arrangement Resolution.

 

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Current Hudbay Shareholders and Former CMMC Shareholders are expected to own approximately 76% and 24% of the Hudbay Shares in the Combined Company, respectively, immediately following completion of the Arrangement (on a non-diluted basis), in each case, based on the number of Hudbay Shares and CMMC Shares issued and outstanding as of April 12, 2023 (the business day immediately prior to the announcement of the Arrangement). The completion of the Arrangement will not result in a material impact on control or direction over Hudbay.

As a result, at the Hudbay Meeting, Hudbay Shareholders will be asked to consider and vote upon the Arrangement Resolution and such other business as may properly come before the Hudbay Meeting.

In order for the Arrangement to be completed, Hudbay Shareholders must approve the Hudbay Resolution. To pass, the Hudbay Resolution must be approved by at least a simple majority of the votes cast by Hudbay Shareholders present virtually or represented by proxy and entitled to vote at the Hudbay Meeting.

Who Can Vote

The Hudbay Record Date is April 28, 2023. TSX Trust has prepared a list, as of the close of business (Toronto time) on the Hudbay Record Date, of the Registered Hudbay Shareholders. Hudbay Shareholders whose name appears on such list is entitled to vote the shares on such list at the Hudbay Meeting. Each Hudbay Share entitles the holder to one vote on the Hudbay Resolution.

Voting Hudbay Shares and Participating at the Hudbay Meeting

The Hudbay Meeting is a completely virtual meeting, which will be conducted via live webcast, where all Hudbay Shareholders regardless of geographic location will have an opportunity to participate at the Hudbay Meeting.

Hudbay Shareholders are strongly advised to carefully read the voting and participation instructions below that are applicable to them as well as the Hudbay Virtual Meeting User Guide attached as Appendix F to this Circular.

Registered Hudbay Shareholders

If you were a Registered Hudbay Shareholder on the Hudbay Record Date, you may vote online at the virtual Hudbay Meeting at https://web.lumiagm.com/265891707. Click on ‘I have a control number’ and you will be prompted to enter your twelve-digit TSX control number and the password hudbayspecial (case sensitive). You must be connected to the Internet at all times to be able to vote and it is your responsibility to make sure you stay connected for the entire Hudbay Meeting. Registered Hudbay Shareholders on the Hudbay Record Date who voted prior to the Hudbay Meeting do not need to vote again during the Hudbay Meeting.

Alternatively, you may give another person authority to represent you and vote your shares online at the virtual Hudbay Meeting, as described below under the heading “Voting Hudbay Shares by Proxy”.

If a Registered Hudbay Shareholder would like to ask a question at the Hudbay Meeting, login using your TSX control number and select the messaging icon. Messages can be submitted at any time during the Q&A session up until the Chair closes the session. Type your message within the chat box in the top portion of the messaging screen. Once you are happy with your message click the send button.

 

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Non-Registered Hudbay Shareholders

It is possible that your Hudbay Shares are registered in the name of an intermediary, which is usually a trust company, securities broker or other financial institution. If your Hudbay Shares are registered in the name of an intermediary, you are a Non-Registered Hudbay Shareholder. Your intermediary is entitled to vote the Hudbay Shares held by it and beneficially owned by you on the Hudbay Record Date. However, it must first seek your instructions as to how to vote your Hudbay Shares or otherwise make arrangements so that you may vote your Hudbay Shares directly. An intermediary is not entitled to vote the Hudbay Shares held by it without written instructions from the beneficial owner. As a Non-Registered Hudbay Shareholder, you may vote your Hudbay Shares through your intermediary or online at the virtual Hudbay Meeting by taking the appropriate steps, which are the same for objecting beneficial owners (“OBO”) and non-objecting beneficial owners (“NOBO”) of Hudbay Shares. You are an OBO if you have not allowed your intermediary to disclose your ownership information to Hudbay. You are a NOBO if you have provided instructions to your intermediary to disclose your ownership information to Hudbay.

Please note that if you are a Non-Registered Hudbay Shareholder, regardless of whether you are a NOBO or an OBO, and you wish to vote online at the virtual Hudbay Meeting, you will not be recognized at the Hudbay Meeting for the purpose of voting Hudbay Shares registered in the name of an intermediary unless you appoint yourself as a proxyholder and register with TSX Trust by e-mailing tsxtrustproxyvoting@tmx.com the “Request for control number” form, which can be found at https://tsxtrust.com/resource/en/75 (see “Voting Hudbay Shares by Proxy—Appointing a Proxyholder” below). In order to appoint yourself as proxyholder, you should follow the instructions on the voting instruction form (“VIF”) and, in so doing, specify your own name as the person whom you are appointing as proxy for the purposes of voting your Hudbay Shares. You are reminded that any voting instructions should be communicated to your intermediary in accordance with the procedures set out in the VIF well in advance of the June 9, 2023 deadline for the receipt of proxies.

If you are a Non-Registered Hudbay Shareholder and you would like to ask a question at the Hudbay Meeting, login using the TSX control number you received when you appointed yourself a proxyholder and registered with TSX Trust. Questions can be submitted at any time during the Q&A session up until the Chair closes the session by using the messaging icon. Type your message within the chat box in the top portion of the messaging screen. Once you are happy with your message click the send button.

Non-Registered Hudbay Shareholders who have not duly appointed themselves as proxyholder will not be able to vote or ask questions at the Hudbay Meeting, however such Non-Registered Hudbay Shareholders may still attend the Hudbay Meeting as guests through the live webcast at https://web.lumiagm.com/265891707.

NOBOs and OBOs

NOBOs and OBOs should carefully review the instructions provided to them by their intermediary regarding how to provide voting instructions or how to obtain a proxy with respect to their Hudbay Shares. Such Non-Registered Hudbay Shareholders may also wish to contact their intermediary directly in order to obtain instructions regarding how to vote Hudbay Shares that they beneficially own. The proxy-related materials will be sent by CMMC indirectly to NOBOs and CMMC intends to pay for intermediaries to deliver proxy-related materials and Form 54-101F7 (the request for voting instructions) to OBOs, in accordance with NI 54-101.

Hudbay Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-866-581-1571 (toll-free in North America) or 1-416-623-2514 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.HudbayPOA.com.

CMMC Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

 

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Voting Hudbay Shares by Proxy

If you will not be able to attend and vote online at the Hudbay Meeting, you may vote in advance by using the form of proxy or VIF that has been provided to you. A proxy or VIF must be properly completed in writing and must be executed by you or by your attorney authorized in writing.

Deadline for Proxies

Any proxy to be used at the Hudbay Meeting must be received by Hudbay’s transfer agent, TSX Trust, prior to 10:30 a.m. (Toronto Time) on June 9, 2023, or 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Hudbay Meeting. Late proxies may be accepted or rejected by the Chair of the Hudbay Meeting in his discretion, and the Chair is under no obligation to accept or reject any particular late proxy.

Registered Hudbay Shareholders may provide their voting instructions by any of the following means:

 

   

by mail to TSX Trust Company, Suite 301, 100 Adelaide Street West, Toronto, Ontario M5H 4H1 (a pre-paid, pre-addressed return envelope is enclosed);

 

   

by courier to TSX Trust Company, Suite 301, 100 Adelaide Street West, Toronto, Ontario M5H 4H1;

 

   

by fax to 1-416-595-9593; or

 

   

by Internet at www.voteproxyonline.com.

Non-Registered Hudbay Shareholders may provide their voting instructions by mail, by telephone or online at www.proxyvote.com by following the instructions provided to them in their VIF.

Your Proxy Vote

On the form of proxy, you can indicate how you want to vote your Hudbay Shares, or you can let your proxyholder decide for you.

All Hudbay Shares represented by properly completed proxies received by TSX Trust no later than 10:30 a.m. (Toronto Time) on June 9, 2023, or 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Hudbay Meeting will be voted for, against or withheld from voting, in accordance with your instructions as specified in the proxy. Late proxies may be accepted or rejected by the Chair of the Hudbay Meeting in his discretion, and the Chair is under no obligation to accept or reject any particular late proxy.

If you give directions on how to vote your Hudbay Shares on your form of proxy, your proxyholder must vote your Hudbay Shares according to your instructions. If you have not specified how to vote on a particular matter on your form of proxy, your proxyholder can vote your Hudbay Shares as he or she sees fit. If neither you nor your proxyholder gives specific instructions, your Hudbay Shares will be voted as FOR the approval of the Hudbay Resolution.

Appointing a Proxyholder

A proxyholder is the person you appoint to act on your behalf at the Hudbay Meeting (including any postponement of the Hudbay Meeting or continuation after an adjournment of the Hudbay Meeting) and to vote your Hudbay Shares. You have the right to appoint a person or company other than the Hudbay representatives named as proxyholders to represent you at the Hudbay Meeting. To do so, simply fill in the proxyholder’s name in the blank space provided on the enclosed form of proxy. If you leave the space in the form of proxy blank, the persons designated in the form, who are our Chair and our President and Chief Executive Officer, are appointed to act as your proxyholder.

 

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Hudbay Shareholders who wish to appoint a person other than the management nominees identified on the form of proxy or VIF (including a Non-Registered Hudbay Shareholder who wishes to appoint themselves to attend) must carefully follow the instructions in the Circular and on their form of proxy or VIF. These instructions include the additional step of registering such proxyholder with Hudbay’s transfer agent, TSX Trust, by e-mailing tsxtrustproxyvoting@tmx.com the “Request for control number” form, which can be found at https://tsxtrust.com/resource/en/75, after submitting their form of proxy or VIF. Failure to register the proxyholder with TSX Trust will result in the proxyholder not receiving a control number to vote and participate at the Hudbay Meeting. Such an unregistered proxyholder will only be able to attend the Hudbay Meeting as a guest.

Revoking your Proxy

If you submit a form of proxy, you may revoke it at any time before it is used by doing any one of the following:

 

   

you may send another form of proxy with a later date to TSX Trust, but it must reach the transfer agent no later than 10:30 a.m. (Toronto Time) on June 9, 2023, or 48 hours (excluding Saturdays, Sundays and holidays) before any postponement or adjournment of the Hudbay Meeting;

 

   

you may deliver a signed written statement, stating that you want to revoke your form of proxy, to Hudbay’s Corporate Secretary no later than the last business day preceding the Hudbay Meeting or any postponement or adjournment of the Hudbay Meeting, at 25 York Street, Suite 800, Toronto, Ontario, M5J 2V5; or

 

   

you may revoke your form of proxy in any other manner permitted by law.

You may revoke your proxy at any time before it is acted on. In order to revoke your proxy, you must send a written statement indicating you wish to have your proxy revoked. This written statement must be received by TMX at the address indicated on the accompanying Notice at any time up to and including the last business day preceding the day of the Hudbay Meeting or any adjournment or postponement of the Hudbay Meeting, or with the Chairman of the Hudbay Meeting prior to the Hudbay Meeting’s commencement on the date of the Hudbay Meeting or any adjournment or postponement of the Hudbay Meeting, or in any other manner permitted by law.

If as a Registered Hudbay Shareholder you are using your control number to log in to the Hudbay Meeting, you will be provided the opportunity to vote by online ballot at the appropriate time on the matters put forth at the Hudbay Meeting. If you have already voted by proxy and you vote again during the online ballot during the Hudbay Meeting, your online vote during the Hudbay Meeting will revoke your previously submitted proxy. If you have already voted by proxy and do not wish to revoke your previously submitted proxy, do not vote again during the online ballot vote.

Only Registered Hudbay Shareholders have the right to revoke a proxy. Non-Registered Hudbay Shareholders who wish to change their vote must make appropriate arrangements with their respective dealers or other intermediaries. Late proxies may be accepted or rejected by the Chair of the Hudbay Meeting in his discretion, and the Chair is under no obligation to accept or reject any particular late proxy.

Hudbay Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-866-581-1571 (toll-free in North America) or 1-416-623-2514 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.HudbayPOA.com.

 

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CMMC Shareholders and CMMC CDI Holders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.CopperMountainPOA.com.

Additional Matters Presented at the Hudbay Meeting

The form of proxy or VIF confers discretionary authority upon the persons named as proxyholders therein with respect to any amendments or variations to the matters identified in the Hudbay Notice of Special Meeting and with respect to other matters that may properly come before the Hudbay Meeting or any postponement or adjournment thereof. As of the date hereof, our management is not aware of any matters to be considered at the Hudbay Meeting other than the matters described in the Hudbay Notice of Meeting, or any amendments or variations to the matters described in such notice.

If you sign and return the VIF, your Hudbay Shares will be voted in accordance with your instructions and, with respect to any matter presented at the Hudbay Meeting, or at any postponement or adjournment thereof, in addition, or as an amendment or variation to the matters described in the Hudbay Notice of Meeting, in accordance with the discretionary authority provided therein.

You have the right to appoint a person or company other than the Hudbay representatives named as proxyholders to represent you at the Hudbay Meeting. If you sign and return the form of proxy and do not appoint a proxyholder by filling in a name, the Hudbay representatives named as proxies will vote in their best judgment.

Voting Shares and Principal Holders

The Hudbay Shares are the only shares which entitle shareholders to vote at the Hudbay Meeting. The holders of Hudbay Shares are entitled to one vote per share. The presence of at least two people holding or representing by proxy at least 25% of the total number of votes attached to the issued common shares entitled to vote at the Hudbay Meeting is necessary for a quorum at the Hudbay Meeting.

As at May 12, 2023, the final business day prior to the date of this Circular, 262,053,610 Hudbay Shares were issued and outstanding.

To the knowledge of the directors and executive officers of Hudbay, based upon filings made with Canadian and United States securities regulators on or before the date of this Circular, the persons who beneficially own, or control or direct, directly or indirectly, voting securities carrying more than 10% of the voting rights attached to any class of our voting securities are as follows:

 

Name

  

Number of Hudbay Shares

  

% of Outstanding Hudbay
Shares

GMT Capital Corp

   31,653,920(1)    12.1%

Notes:

 

(1)

According to GMT Capital Corp’s Schedule 13G dated December 31, 2022 as filed on EDGAR on January 19, 2023.

 

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INFORMATION CONCERNING THE CMMC MEETING

The CMMC Meeting will be held on June 13, 2023, subject to any adjournment or postponement thereof, in a virtual-only format via live webcast available online using the virtual shareholder meeting platform at www.virtualshareholdermeeting.com/CMMC2023 at 9:00 a.m. (Vancouver time) for the purposes set forth in the accompanying Notice of Special Meeting of Shareholders of CMMC.

The solicitation of proxies is intended to be primarily by mail but may also be made by telephone, e-mail, Internet, fax transmission or other electronic means of communication or in person by the directors, officers, employees and representatives of CMMC. The total cost of soliciting proxies and mailing the materials in connection with the CMMC Meeting will be borne by CMMC. Hudbay and CMMC have engaged Kingsdale Advisors as their strategic shareholder advisor and proxy solicitation agent and will pay fees of approximately C$200,000, in aggregate, to Kingsdale Advisors for proxy solicitation services in addition to certain out-of-pocket expenses. Hudbay and CMMC may also reimburse brokers and other persons holding Shares in their name or in the name of nominees for their costs incurred in sending proxy material to their principals in order to obtain their proxies. Kingsdale Advisors’ fee will be borne in equal amounts by Hudbay and CMMC.

Hudbay and CMMC may utilize the Broadridge QuickVoteTM system, which involves NOBOs being contacted by Kingsdale Advisors, which is soliciting proxies on behalf of Hudbay and CMMC, to obtain voting instructions over the telephone and relaying them to Broadridge (on behalf of the NOBO’s Intermediary). While representatives of Kingsdale Advisors are soliciting proxies on behalf of Hudbay and CMMC, Shareholders are not required to vote in the manner recommended by the Board of Directors. The QuickVoteTM system is intended to assist Shareholders in placing their votes, however, there is no obligation for any Shareholders to vote using the QuickVoteTM system, and Shareholders may vote (or change or revoke their votes) at any other time and in any other applicable manner described in this Circular. Any voting instructions provided by a Shareholder will be recorded and such Shareholder will receive a letter from Broadridge (on behalf of the Shareholder’s Intermediary) as confirmation that their voting instructions have been accepted.

Hudbay has entered into CMMC Support and Voting Agreements with the directors and certain senior officers of CMMC, pursuant to which the CMMC Supporting Shareholders have agreed, among other things and subject to the terms and conditions of the CMMC Support and Voting Agreements, to vote their CMMC Shares in favour of the Arrangement Resolution. As at the CMMC Record Date, the CMMC Supporting Shareholders collectively beneficially owned or exercised control or direction over 7,886,800 CMMC Shares, representing approximately 3.68% of the issued and outstanding CMMC Shares.

Purpose of the CMMC Meeting

This Circular is furnished in connection with the solicitation of proxies by the management of CMMC for use at the CMMC Meeting. As set out in the Notice of Special Meeting of Shareholders of CMMC, CMMC Shareholders will be asked to consider and vote on the Arrangement Resolution.

Pursuant to the Arrangement, Hudbay will acquire all of the issued and outstanding CMMC Shares. As consideration under the Arrangement, CMMC Shareholders (other than Dissenting Shareholders) will receive 0.381 of a Hudbay Share for each CMMC Share or CMMC CDI held. Current Hudbay Shareholders and Former CMMC Shareholders are expected to own approximately 76% and 24% of the Hudbay Shares in the Combined Company, respectively, immediately following completion of the Arrangement (on a non-diluted basis), in each case, based on the number of Hudbay Shares and CMMC Shares issued and outstanding as of April 12, 2023 (the business day immediately prior to the announcement of the Arrangement). Upon completion of the Arrangement, CMMC will be an indirect wholly-owned Subsidiary of Hudbay.

 

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In order for the Arrangement to be completed, CMMC Shareholders must approve the Arrangement Resolution. The Arrangement Resolution must be approved by (a) at least two-thirds of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, and (b) a simple majority of the votes cast by CMMC Shareholders present virtually or represented by proxy at the CMMC Meeting, excluding the votes required to be excluded by MI 61-101, as described under “Securities Law Matters – Interests of Certain Persons in the ArrangementMultilateral Instrument 61-101”.

Virtual CMMC Meeting

In light of ongoing concerns related to the spread of COVID-19 and in order to mitigate potential risks to the health and safety of CMMC Shareholders, employees, communities and other stakeholders of CMMC, and to provide CMMC Shareholders with equal opportunity to participate in the CMMC Meeting regardless of geographic location and equity ownership, CMMC is convening and conducting the CMMC Meeting in a virtual-only format. The CMMC Meeting will be conducted via live webcast available online using a virtual shareholder meeting platform at www.virtualshareholdermeeting.com/CMMC2023.

Non-Registered CMMC Shareholders must carefully follow the procedures set out in this Circular in order to vote and ask questions through the live webcast. Non-Registered CMMC Shareholders who have not been duly appointed as proxyholders may check-in using the 16-digit control number located on their voting instruction form and will be able to ask questions, but not vote, through the live webcast. Guests, including CMMC CDI holders, can log into the CMMC Meeting and listen to the live webcast but will not be entitled to vote or ask questions.

Please note that only Registered CMMC Shareholders and proxyholders (including Non-Registered CMMC Shareholders who have duly appointed themselves as proxyholder) are permitted to vote at the CMMC Meeting. CMMC CDI holders are not able to appoint themselves as a proxyholder and may only attend the CMMC Meeting as guests. Non-Registered CMMC Shareholders wishing to attend the CMMC Meeting and indirectly vote their CMMC Shares as their own proxyholder must appoint themselves as a proxyholder, in accordance with the instructions set out below.

CMMC Shareholders are strongly advised to carefully read the CMMC Virtual Meeting User Guide attached as Appendix G to this Circular.

Attending and Participating at the CMMC Meeting

To attend and participate in the CMMC Meeting:

 

   

Registered CMMC Shareholders will need to visit www.virtualshareholdermeeting.com/CMMC2023 and check-in using the 16-digit control number included on their form of proxy. Duly appointed proxyholders will need to check in with the eight character Appointee Identification Number and Appointee Name they’ve been provided.

 

   

Non-Registered CMMC Shareholders who have not been duly appointed as proxyholders will need to visit www.virtualshareholdermeeting.com/CMMC2023 and check-in using the 16-digit control number located on their voting instruction form and will be able to ask questions, but not vote, through the live webcast.

 

   

Guests, including CMMC CDI holders, can log into the CMMC Meeting at www.virtualshareholdermeeting.com/CMMC2023 and listen to the live webcast but will not be entitled to vote or ask questions.

The CMMC Meeting platform is fully supported across browsers and devices running the most updated version of applicable software plugins. You should ensure you have a strong, preferably high-speed, Internet connection wherever you intend to participate in the CMMC Meeting.

 

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The CMMC Meeting will begin promptly at 9:00 a.m. (Vancouver time) on June 13, 2023. Online check-in will open fifteen minutes prior to the CMMC Meeting at 8:45 a.m. (Vancouver time). You should allow ample time for online check-in procedures. If you encounter any difficulties accessing the CMMC Meeting during the check-in or CMMC Meeting time, please call the technical support number that will be posted on the log in page.

The webcast CMMC Meeting allows you to attend the CMMC Meeting live, and registered CMMC Shareholders and duly appointed proxyholders are able to submit questions by typing them into the “ask a question” text box and submit their vote while the CMMC Meeting is being held if they have not done so in advance of the CMMC Meeting.

Questions will not be displayed to webcast participants, but all reasonable efforts will be made to address questions raised during the time allotted. A moderator may filter questions for common themes and may present a summarized version of the questions to the Chair or appropriate officer of CMMC. Questions should be relevant to the business of the CMMC Meeting. Inappropriate questions will not be presented to, or addressed by, the Chair.

CMMC Shareholders are strongly advised to carefully read the CMMC Virtual Meeting User Guide attached as Appendix G to this Circular.

Appointment and Revocation of Proxies

CMMC’s named proxyholders are Gilmour Clausen, President and Chief Executive Officer of CMMC or, failing him, Letitia Wong, Chief Financial Officer of CMMC. A CMMC SHAREHOLDER WISHING TO APPOINT SOME OTHER PERSON (WHO NEED NOT BE A CMMC SHAREHOLDER) TO REPRESENT THE CMMC SHAREHOLDER AT THE CMMC MEETING HAS THE RIGHT TO DO SO, EITHER BY STRIKING OUT THE NAMES OF THOSE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY AND INSERTING THE DESIRED PERSON’S NAME IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY OR BY COMPLETING ANOTHER FORM OF PROXY. To provide the appointed proxyholder access to the virtual CMMC Meeting, a CMMC Shareholder must create a unique eight-character “Appointee Identification Number” and specify the “Appointee Name” in the spaces provided in the form of proxy or online at www.proxyvote.com. The CMMC Shareholder must then provide the proxyholder with the unique eight-character Appointee Identification Number along with the specified Appointee Name to allow the proxyholder access to the virtual CMMC Meeting. If an eight-character Appointee Identification Number is not created by the CMMC Shareholder, the appointed proxyholder will not be able to access the virtual CMMC Meeting.

A proxy will not be valid for the CMMC Meeting or any adjournment or postponement thereof unless it is signed by the CMMC Shareholder or by the CMMC Shareholder’s attorney authorized in writing or, if the CMMC Shareholder is a corporation, it must be executed under corporate seal or by a duly authorized officer or attorney of the corporation and delivered to Copper Mountain Mining Corporation, c/o Broadridge, Data Processing Centre, P.O. Box 3700, STN Industrial Park, Markham, Ontario, Canada, L3R 9Z9, no later than 9:00 a.m. (Vancouver time) on June 9, 2023, or if the CMMC Meeting is adjourned or postponed, no later than 48 hours (excluding weekends and statutory holidays in the province of British Columbia) before the CMMC Meeting is reconvened. Late proxies may be accepted or rejected by the Chair at his discretion and the Chair is under no obligation to accept or reject any particular late proxy. The deadline for the deposit of proxies may be waived or extended by the Chair at his discretion without notice.

CMMC Shareholders whose CMMC Shares are registered in their names may also vote their CMMC Shares using a touch-tone telephone by calling toll free in North America 1-800-474-7493 (English) or 1-800-474-7501 (French) or by the Internet at www.proxyvote.com. If voting by telephone or on the Internet, please follow the instructions carefully and ensure that you have your form of proxy in hand as you will be required to enter the 16-digit control number located on the form of proxy. Your vote must be received no later than 9:00 a.m. (Vancouver time) on June 9, 2023, or if the CMMC Meeting is adjourned or postponed, no later than 48 hours (excluding weekends and statutory holidays in the Province of British Columbia) before the CMMC Meeting is reconvened. If you wish to attend the CMMC Meeting virtually or appoint someone else to attend on your behalf, you must do so either by the Internet or by mail. The telephone voting service is not available for this purpose.

 

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If you are a Registered CMMC Shareholder, you can change or revoke a previously delivered vote by: (a) voting again on the Internet or by telephone, or completing a new form of proxy that is dated later than the form of proxy previously submitted and depositing it with Broadridge in accordance with the instructions set out above no later than 9:00 a.m. (Vancouver time) on June 9, 2023, or, if the CMMC Meeting is adjourned or postponed, no later than 48 hours (excluding weekends and statutory holidays in the Province of British Columbia) before the CMMC Meeting is reconvened; (b) depositing a written statement with Broadridge (executed by you or a person authorized to sign on your behalf) in accordance with the instructions set out above no later than 9:00 a.m. (Vancouver time) on June 9, 2023, or, if the CMMC Meeting is adjourned or postponed, no later than 48 hours (excluding weekends and statutory holidays in British Columbia) before the CMMC Meeting is reconvened; or (c) in any other manner permitted by law.

Only Registered CMMC Shareholders have the right to directly revoke a proxy. Non Registered CMMC Shareholders (other than CMMC CDI holders) that wish to change their vote must arrange for their respective Intermediaries to revoke the proxy on their behalf in accordance with any requirements of the Intermediaries. Holders of CMMC CDIs that wish to change their vote must do so prior to the CDI VIF deadline.

Hudbay Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-866-581-1571 (toll-free in North America) or 1-416-623-2514 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current with and obtain information about voting your shares, please visit www.HudbayPOA.com.

CMMC Shareholders: If you have any questions or need assistance voting, you can contact Kingsdale Advisors at 1-855-682-2031 (toll-free in North America) or 1-416-623-4172 (collect outside North America) or by email at contactus@kingsdaleadvisors.com. To keep current wi